FEDERATED LATIN AMERICAN GROWTH FUND CLASS A SHARES SHAREHOLDER TRANSACTION EXPENSES

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FEDERATED LATIN AMERICAN GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
PROSPECTUS

The Class A Shares of Federated Latin American Growth Fund (the "Fund")
represent interests in a diversified portfolio of World Investment Series, Inc.
(the "Corporation"), an open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide long-term growth of capital.
Any income received from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in equity securities of Latin
American companies.

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

This prospectus contains the information you should read and know before you
invest in the Class A Shares of the Fund. Keep this prospectus for future
reference.

The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, and Class C Shares dated January 31, 1997, with the
Securities and Exchange Commission ("SEC"). The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain other
information or to make inquiries about the Fund, contact your financial
institution. The Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund are
maintained electronically with the SEC at Internet Web site
(▇▇▇▇://▇▇▇.▇▇▇.▇▇▇).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

Prospectus dated January 31, 1997

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TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1

Financial Highlights...........................................................2

General Information............................................................3

Investment Information.........................................................4
Investment Objective.........................................................4
Investment Policies..........................................................4
Investment Limitations......................................................15

Net Asset Value...............................................................15

How to Purchase Shares........................................................16
What Shares Cost............................................................16
Special Purchase Features...................................................19

Exchange Privilege............................................................20
Requirements for Exchange...................................................20
Tax Consequences............................................................20
Making an Exchange..........................................................20

How to Redeem Shares..........................................................21
Special Redemption Features.................................................22
Contingent Deferred Sales Charge............................................23
Elimination of Contingent Deferred
Sales Charge.............................................................23
Account and Share Information.................................................24

Corporation Information.......................................................25
Management of the Corporation...............................................25

Distribution of Class A Shares..............................................27

Administration of the Fund..................................................28

Expenses of the Fund and
Class A Shares...........................................................28
Brokerage Transactions......................................................29

Shareholder Information.......................................................29
Voting Rights...............................................................29

Tax Information...............................................................30
Federal Income Tax..........................................................30
State and Local Taxes.......................................................30

Performance Information.......................................................31

Other Classes of Shares.......................................................31

Appendix......................................................................32

Addresses.....................................................................35

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SUMMARY OF FUND EXPENSES

FEDERATED LATIN AMERICAN GROWTH FUND
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................. 5.50%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)...... None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable)(1)................................................... 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(2).............................................................. 0.00%
12b-1 Fee(3).................................................................................. 0.00%
Total Other Expenses (after expense reimbursement)............................................ 1.97%
Shareholder Services Fee......................................................... 0.25%
Total Operating Expenses(4).......................................................... 1.97%

(1) Class A Shares purchased with the proceeds of a redemption of shares of an
unaffiliated investment company purchased or redeemed with a sales charge
and not distributed by Federated Securities Corp. may be charged a
contingent deferred sales charge of 0.50% for redemptions made within one
full year of purchase. See "Contingent Deferred Sales Charge."

(2) The management fee has been reduced to reflect the voluntary waiver of the
management fee. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 1.25%.

(3) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1997. If Class A Shares were
paying or accruing the 12b-1 fee. Class A Shares would be able to pay up to
0.25% of its average daily net assets for the 12b-1 fee. See "Corporation
Information."

(4) The total operating expenses would have been 8.93% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Corporation Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.

EXAMPLE 1 year 3 years 5 years 10 years
------ ------- ------- --------

You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return. (2) redemption at the end of each
time period, and (3) payment of the maximum sales charge........... $ 74 $ 113 $ 155 $272

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

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FINANCIAL HIGHLIGHTS--CLASS A SHARES

FEDERATED LATIN AMERICAN GROWTH FUND
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(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 17, 1997 on the Fund's
financial statements for the period ended November 30, 1996, and on the
following table for the period presented, is included in the Annual Report,
which is incorporated by reference herein. This table should be read in
conjunction with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.

PERIOD ENDED
NOVEMBER 30,
1996(A)
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NET ASSET VALUE, BEGINNING OF PERIOD $10.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.12
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Net realized and unrealized gain (loss) on investments 1.44
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Total from investment operations 1.56
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NET ASSET VALUE, END OF PERIOD $11.56
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TOTAL RETURN (B) 15.60%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 1.97%*
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Net investment income 1.49%*
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Expense waiver/reimbursement (c) 6.96%*
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $4,836
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Average commission rate paid $0.0001
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Portfolio turnover 38%
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* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated November 30, 1996, which can be obtained free of charge.

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GENERAL INFORMATION

The Corporation was established under the laws of the state of Maryland on
January 25, 1994. The Corporation's address is Federated ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The Articles of Incorporation permit the
Corporation to offer separate series of shares representing interests in
separate portfolios of securities. As of the date of this prospectus, the Board
of Directors (the "Directors") has established three classes of shares for the
Fund, known as Class A Shares, Class B Shares, and Class C Shares. This
prospectus relates only to the Class A Shares (the "Shares") of the Fund.
Shares of the Fund are designed for individuals and institutions seeking
long-term growth of capital by investing primarily in equity securities of Latin
American companies.

For information on how to purchase Shares of the Fund, please refer to "How to
Purchase Shares." The minimum initial investment for Class A Shares is $500.
However, the minimum initial investment for a retirement account is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement plans which must be in amounts of at least $50.

In general, Class A Shares are sold at net asset value plus an applicable sales
charge and are redeemed at net asset value. However, a contingent deferred sales
charge is imposed under certain circumstances. For a more complete description,
see "How to Redeem Shares."

In addition, the Fund also pays a shareholder services fee at an annual rate not
to exceed 0.25% of average daily net assets.

Information regarding the exchange privilege offered with respect to the Fund
and certain other funds for which affiliates of Federated Investors serve as
investment adviser or principal underwriter (the "Federated Funds") can be found
under "Exchange Privilege."

Investors should be aware of the following general observations. The Fund may
make certain investments and employ certain investment techniques that involve
risks, including, but not limited to, investing in non-U.S. issuers, entering
into repurchase agreements, investing in when-issued securities, lending
portfolio securities, and entering into futures contracts and related options.
These risks are described under "Investment Policies."

The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Federated."

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INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The Fund seeks to provide long-term growth of capital. Any income received from
the portfolio is incidental. The investment objective of the Fund cannot be
changed without the approval of the shareholders. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing primarily in equity
securities of Latin American companies. Under normal market conditions, the Fund
will invest at least 65% of its total assets in equity securities of Latin
American companies. For purposes of this prospectus, Latin America is defined as
Mexico, Central America, South America, and the Spanish-speaking islands of the
Caribbean.

Latin American companies are defined as (i) those organized under the laws of,
or with a principal office located in, a Latin American country or (ii) those
for which the principal securities trading market is in Latin America or (iii)
those, wherever organized or traded, which derived (directly or indirectly
through subsidiaries) at least 50% of their total assets, capitalization, gross
revenue or profit in their most current fiscal year from goods produced,
services performed, or sales made in Latin America.

Although the Fund may invest in securities of issuers located in any country in
Latin America, the Fund expects to focus its investments in the most developed
capital markets of Latin America, which currently include: Argentina, Bolivia,
Brazil, Chile, Colombia, Mexico, Peru, Uruguay, and Venezuela. The Fund may
invest in other countries of Latin America when their markets become
sufficiently developed, in the opinion of the investment adviser. The Fund
intends to allocate its investments among at least three countries at all times
and does not expect to concentrate investments in any particular industry.

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

ACCEPTABLE INVESTMENTS

The equity securities in which the Fund may invest include common stock,
preferred stock (either convertible or non-convertible), sponsored or
unsponsored depositary receipts or shares, and warrants, including other
substantially similar forms of equity with comparable risk characteristics as
well as other forms which may be developed in the future. Securities may be
purchased on securities exchanges, traded over-the-counter, or have no organized
market. The Fund may also purchase corporate and government fixed income
securities denominated in currencies other than U.S. dollars; enter into forward
commitments, repurchase agreements and foreign currency transactions; maintain
reserves in foreign or U.S. money market instruments and cash; and purchase
options and financial futures contracts.

COMMON AND PREFERRED STOCK

Stocks represent shares of ownership in a company. Generally, preferred stock
has a specified dividend and ranks after bonds and before common stocks in its
claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate in
company profits on a pro rata basis; profits may be paid out in dividends or
reinvested in the company to help it

grow. Increases and decreases in earnings are usually reflected in a company's
stock price, so common stocks generally have the greatest appreciation and
depreciation potential of all corporate securities. While most preferred stocks
pay a dividend, the Fund may purchase preferred stock where the issuer has
omitted, or is in danger of omitting, payment of its dividend. Such investments
would be made primarily for their capital appreciation potential.

In selecting securities, the investment adviser typically evaluates industry
trends, a company's financial strength, its competitive position in domestic and
export markets, technology, recent developments and profitability, together with
overall growth prospects. Other considerations generally include quality and
depth of management, government regulation, and availability and cost of labor
and raw materials. Investment decisions are made without regard to arbitrary
criteria as to minimum asset size, debt-equity ratios or dividend history of
portfolio companies.

DEPOSITARY RECEIPTS

The Fund may invest in foreign issuers by purchasing sponsored or unsponsored
securities representing underlying international securities such as American
Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"), European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"), Global
Depositary Certificates ("GDCs"), and International Depositary Receipts ("IDRs")
or securities convertible into foreign equity securities. ADRs and ADSs
typically are issued by a United States bank or trust company and evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depositary Receipts ("CDRs"), GDRs,
GDCs, and IDRs are typically issued by foreign banks or trust companies,
although they also may be issued by United States banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
United States corporation. ADRs, ADSs, CDRs, EDRs, GDRs, GDCs, and IDRs are
collectively known as "Depositary Receipts." Depositary Receipts may be
available for investment through "sponsored" or "unsponsored" facilities. A
sponsored facility is established jointly by the issuer of the security
underlying the receipt and a depositary, whereas an unsponsored facility may be
established by a depositary without participation by the issuer of the receipt's
underlying security. Holders of an unsponsored Depositary Receipt generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through to the holders of the receipts voting rights with respect to the
deposited securities.

DEBT SECURITIES

In pursuit of the Fund's objective of long-term growth of capital, the Fund may
invest up to 35% of its total assets in debt securities. Capital appreciation in
debt securities may arise as a result of favorable changes in the
creditworthiness of issuers, relative interest rate levels, or relative foreign
exchange rates. Any income received from debt securities is incidental to the
Fund's objective of long-term growth of capital. These debt obligations consist
of U.S. and foreign government securities and corporate debt securities,
including, but not limited to, Yankee bonds, Eurobonds and depositary receipts.
The issuers of such debt securities may or may not be domiciled in Latin
America.

The Fund may also invest in certain debt obligations customarily referred to as
"▇▇▇▇▇ ▇▇▇▇▇," that have been created through the exchange of existing
commercial bank loans to Latin American public and private entities for new
bonds in connection with debt restructurings under a debt restructuring plan
announced by former U.S. Sec-

retary of the Treasury ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "▇▇▇▇▇ Plan"). ▇▇▇▇▇ ▇▇▇▇▇ have
been issued only recently and for that reason do not have a long payment
history. ▇▇▇▇▇ ▇▇▇▇▇ may be collateralized or uncollateralized, are issued in
various currencies (primarily the U.S. dollar) and are actively traded in the
over-the-counter secondary market for Latin American debt instruments. ▇▇▇▇▇
▇▇▇▇▇ are neither issued nor guaranteed by the U.S. government.

The debt securities in which the Fund may invest may be rated, at the time of
purchase, as low as C by Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch") or ▇▇▇▇▇'▇ Investors Service, Inc.
("Moody's"), or, if unrated, are of comparable quality as determined by the
investment adviser. Such debt securities are commonly known as "junk bonds." The
prices of fixed income securities generally fluctuate inversely to the direction
of interest rates. Please refer to the Appendix in this prospectus for a
description of these ratings.

CONVERTIBLE SECURITIES

The Fund may invest in convertible securities rated, at the time of purchase, as
low as C by S&P or Fitch or ▇▇▇▇▇'▇, or, if unrated, are of comparable quality
as determined by the investment adviser.

Convertible securities are fixed income securities which may be exchanged or
converted into a predetermined number of the issuer's underlying common stock at
the option of the holder during a specified time period. Convertible securities
may take the form of convertible bonds, convertible preferred stock or
debentures, units consisting of "usable" bonds and warrants or a combination of
the features of several of these securities. The investment characteristics of
each convertible security vary widely, which allows convertible securities to be
employed for a variety of different investment strategies. In selecting a
convertible security, the investment adviser evaluates the investment
characteristics of the convertible security as a fixed income investment, and
the investment potential of the underlying security for capital appreciation.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

Due to restrictions on direct investment by foreign entities in certain Latin
American markets, investments in other investment companies may be the most
practical or only manner in which the Fund can participate in the securities
markets of certain countries in Latin America. The Fund may also invest in other
investment companies for the purpose of investing its short-term cash on a
temporary basis. The Fund may invest up to 10% of its total assets in the
securities of other investment companies. To the extent that the Fund invests in
securities issued by other investment companies, the Fund will indirectly bear
its proportionate share of any fees and expenses paid by such companies, in
addition to the fees and expenses payable directly by the Fund.

RESTRICTED AND
ILLIQUID SECURITIES

in privately negotiated transactions, the prices realized from these sales could
be less than those originally paid by the Fund, or less than what may be
considered the fair value of such securities. Further, companies whose
securities are not publicly traded may not be subject to the disclosure and
other investor protection requirements which might be applicable if their
securities were publicly traded. If such securities are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expense of registration. The Fund
will limit investments in illiquid securities, including certain restricted
securities not determined by the Directors to be liquid, over-the counter
options, swap agreements not determined to be liquid, and repurchase agreements
providing for settlement in more than seven days after notice, to 15% of its net
assets.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements. Repurchase agreements are
arrangements by which the Fund purchases a security for cash and obtains a
simultaneous commitment from the seller (usually a bank or broker/dealer) to
repurchase the security at an agreed-upon price and specified future date. The
repurchase price reflects an agreed-upon interest rate for the time period of
the agreement. The Fund's risk is the inability of the seller to pay the
agreed-upon price on the delivery date. However, this risk is tempered by the
ability of the Fund to sell the security in the open market in the case of a
default. In such a case, the Fund may incur costs in disposing of the security
which would increase Fund expenses. The investment adviser will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.

WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS

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

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

LENDING OF PORTFOLIO SECURITIES

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

TEMPORARY INVESTMENTS

For temporary defensive purposes, when the investment adviser determines that
market conditions warrant (up to 100% of total assets) and to maintain liquidity
(up to 35% of total assets), the

Fund may invest in U.S. and foreign debt instruments as well as cash or cash
equivalents, including foreign and domestic money market instruments, short-term
government and corporate obligations, and repurchase agreements.

FORWARD COMMITMENTS

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

FOREIGN CURRENCY TRANSACTIONS

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

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

FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS

Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated and are maintained until
the contract has been settled. The Fund will not enter into a forward contract
with a term of more than one year. The Fund will generally enter into a forward
contract to provide the proper currency to settle a securities transaction at
the time the transaction occurs ("trade date"). The period between trade date
and settlement date will vary between 24 hours and 60 days, depending upon local
custom.

The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the
investment adviser will consider the likelihood of changes in currency values
when making investment decisions, the investment adviser believes that it is
important to be able to enter into forward contracts when it believes the
interests of the Fund will be served. The Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of the value of the Fund's assets denominated in that currency at the time the
contract was initiated, but as consistent with their other investment policies
and as not otherwise limited in their ability to use this strategy.

OPTIONS

A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying currency, security or other asset at the
exercise price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying currency,
security or other asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow, and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by the Fund is exercised, the Fund foregoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is the risk that the Fund may
be required to take delivery of the underlying asset at a disadvantageous price.
Over-the-counter options ("OTC options") differ from exchange traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event the Fund
may experience material losses. However, in writing options, the premium is paid
in advance by the dealer. OTC options, which may not be continuously liquid, are
available for a greater variety of assets, and with a wider range of expiration
dates and exercise prices, than are exchange traded options.

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

FUTURES AND OPTIONS ON FUTURES

value of such futures contracts exceeds the total market value of the Fund's
portfolio securities. Futures contracts and options thereon sold by the Fund are
generally subject to segregation and coverage requirements established by either
the Commodities Futures Trading Commission ("CFTC") or the Securities and
Exchange Commission ("SEC"), with the result that, if the Fund does not hold the
instrument underlying the futures contract or option, the Fund will be required
to segregate on an ongoing basis with its custodian cash, U.S. government
securities, or other liquid high grade debt obligations in an amount at least
equal to the Fund's obligations with respect to such instruments.

The Fund may enter into securities index futures contracts and purchase and
write put and call options on securities index futures contracts that are traded
on regulated exchanges, including non-U.S. exchanges, to the extent permitted by
the CFTC. Securities index futures contracts are based on indexes that reflect
the market value of securities of the firms included in the indexes. An index
futures contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the differences between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written.

The Fund may enter into securities index futures contracts to sell a securities
index in anticipation of or during a market decline to attempt to offset the
decrease in market value of securities in its portfolio that might otherwise
result. When the Fund is not fully invested and anticipates a significant market
advance, it may enter into futures contracts to purchase the index in order to
gain rapid market exposure that may in part or entirely offset increases in the
cost of securities that it intends to purchase. In many of these transactions,
the Fund will purchase such securities upon termination of the futures position
but, depending on market conditions, a futures position may be terminated
without the corresponding purchases of common stock. The Fund may also invest in
securities index futures contracts when the investment adviser believes such
investment is more efficient, liquid, or cost-effective than investing directly
in the securities underlying the index.

An option on a securities index futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a securities index
futures contract. The Fund may purchase and write put and call options on
securities index futures contracts in order to hedge all or a portion of its
investment and may enter into closing purchase transactions with respect to
written options in order to terminate existing positions. There is no guarantee
that such closing transactions can be effected. The Fund may also invest in
options on securities index futures contracts when the investment adviser
believes such investment is more efficient, liquid or cost-effective than
investing directly in the futures contract or in the securities underlying the
index, or when the futures contract or underlying securities are not available
for investment upon favorable terms.

The use of futures and related options involves special consideration and risks,
for example, (1) the ability of the Fund to utilize futures successfully will
depend on the investment adviser's ability to predict pertinent market
movements; (2) there might be imperfect correlation, or even no correlation,
between the change in market value of the securities held by the Fund and the
prices of the futures and options thereon relating to the securities purchased
or sold by the Fund. The use of futures and related options may reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements but they can also reduce the opportunity for gain by offsetting the
positive effect of favorable price movements in positions. No assurance can be
given that the investment adviser's judgment in this respect will be correct.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the investment adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.
New futures contracts, options thereon, and other financial products and risk
management techniques continue to be developed. The Fund may use these
investments and techniques to the extent consistent with its investment
objective and regulatory and federal tax considerations.

RISKS OF FUTURES AND OPTIONS TRANSACTIONS

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

SWAP AGREEMENTS

As one way of managing its exposure to different types of investments, the Fund
may enter into interest rate swaps, currency swaps, and other types of swap
agreements such as caps, collars, and floors. Depending on how they are used,
swap agreements may increase or decrease the overall volatility of the Fund's
investments, its share price and yield.

Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on the
Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. The Fund may also suffer losses if
it is unable to terminate outstanding swap agreements to reduce its exposure
through offsetting transactions. When the Fund enters into a swap agreement,
assets of the Fund equal to the value of the swap agreement will be segregated
by the Fund.

RISK CHARACTERISTICS OF
FOREIGN SECURITIES

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

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

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

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

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

Brokerage commissions, custodial services, and other costs relating to
investment may be more expensive than in the United States. Foreign markets may
have different clearance and settlement procedures such as requiring payment for
securities before delivery. In certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. The inability of
the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of a portfolio security due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.

CURRENCY RISKS

Because the majority of the securities purchased by the Fund are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value; the value of interest earned;
gains and losses realized on the sale of securities; and net investment income
and capital gain, if any, to be distributed to shareholders by the Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of Fund
assets denominated in the currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease. Under the United States Internal
Revenue Code, as amended (the "Code"), the Fund is required to separately
account for the foreign currency component of gains or losses, which will
usually be viewed under the Code as items of ordinary and distributable in-

come or loss, thus affecting the Fund's distributable income. (See "Federal
Income Tax.")

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

FOREIGN COMPANIES

Other differences between investing in foreign and U.S. companies include:

- less publicly available information about foreign issuers;

- credit risks associated with certain foreign governments;

- the lack of uniform accounting, auditing, and financial reporting standards
and practices or regulatory requirements comparable to those applicable to
U.S. companies;

- less readily available market quotations on foreign issues;

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

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

- the limited size of many foreign securities markets and limited trading volume
in issuers compared to the volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the quality of
securities;

- the likelihood that securities of foreign issuers may be less liquid or more
volatile;

- foreign brokerage commissions may be higher;
- unreliable mail service between countries;

- political or financial changes which adversely affect investments in some
countries;

- increased risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities;

- certain markets may require payment for securities before delivery;

- religious and ethnic instability; and

- certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests.

U.S. GOVERNMENT POLICIES

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

INVESTING IN LATIN AMERICA

The investment adviser believes that investment opportunities may result from
recent trends in Latin America encouraging greater market orientation and less
governmental intervention in economic affairs. Investors, however, should be
aware that the Latin American economies have experienced considerable
difficulties in the past decade. Although there have been significant
improvements in recent years, the Latin American economies continue to
experience challenging problems, including high inflation rates and high
interest rates relative to the U.S. The emergence of

the Latin American economies and securities markets will require continued
economic and fiscal discipline which has been lacking at times in the past, as
well as stable political and social conditions. Recovery may also be influenced
by international economic conditions, particularly those in the U.S., and by
world prices for oil and other commodities. There is no assurance that recent
economic initiatives will be successful.

Certain risks associated with international investments and investing in
smaller, developing capital markets are heightened for investments in Latin
American countries. For example, some of the currencies of Latin American
countries have experienced steady devaluations relative to the U.S. dollar, and
major adjustments have been made in certain of these currencies periodically. In
addition, although there is a trend toward less government involvement in
commerce, governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government still owns or controls many companies,
including some of the largest in the country. Accordingly, government actions in
the future could have a significant effect on economic conditions in Latin
American countries, which could affect private sector companies and the Fund, as
well as the value of securities in the Fund's portfolio.

Most Latin American countries have experienced substantial, and in some periods,
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain Latin American
countries.

Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. Some of these countries have in the past
defaulted on their sovereign debt. Holders of sovereign debt (including the
Fund) may be requested to participate in the rescheduling of such debt and to
extend further loans to governmental entities. There is no bankruptcy proceeding
by which sovereign debt on which governmental entities have defaulted may be
collected in whole or in part.

The limited size of many Latin American securities markets and limited trading
volume in issuers compared to the volume of trading in U.S. securities could
cause prices to be erratic for reasons apart from factors that affect the
quality of securities.

RISK FACTORS RELATING
TO INVESTING IN
HIGH YIELD SECURITIES

Debt obligations that are not determined to be investment grade are high-yield,
high-risk bonds, typically subject to greater market fluctuations and greater
risk of loss of income and principal due to an issuer's default. To a greater
extent than investment grade bonds, lower-rated bonds tend to reflect short-term
corporate, economic, and market developments, as well as investor perceptions of
the issuer's credit quality. In addition, lower-rated bonds may be more
difficult to dispose of or to value than higher-rated, lower-yielding bonds.

The Fund's investment adviser attempts to reduce the risks described above
through diversification of the portfolio and by credit analysis of each

issuer as well as by monitoring broad economic trends and corporate and
legislative developments.

INVESTMENT LIMITATIONS

The Fund will not:

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

- with respect to 75% of its total assets, invest more than 5% of the value of
its total assets in securities of any one issuer (other than cash, cash items,
or securities issued or guaranteed by the U.S. government and its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) or acquire more than 10% of the outstanding voting securities of
any one issuer.

The above investment limitations cannot be changed without shareholder approval.

-------------------------------------------------------

NET ASSET VALUE

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of Class A Shares in the market value of
all securities and other assets of the Fund, subtracting the interest of Class A
Shares in the liabilities of the Fund and those attributable to Class A Shares,
and dividing the remainder by the total number of Class A Shares outstanding.
The net asset value for Class A Shares may differ from that of Class B Shares
and Class C Shares due to the variance in daily net income realized by each
class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.

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

-------------------------------------------------------

HOW TO PURCHASE SHARES

Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500. Additional investments can be made
for as little as $100. The minimum initial and subsequent investment for
retirement plans is only $50. (Financial institutions may impose different
minimum investment requirements on their customers.)

In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:

SALES CHARGE AS DEALER
SALES CHARGE AS A PERCENTAGE CONCESSION
A PERCENTAGE OF NET AS A PERCENTAGE
AMOUNT OF OF OFFERING AMOUNT OF PUBLIC
TRANSACTION PRICE INVESTED OFFERING PRICE
--------------- --------------- --------------- ---------------

Less than
$50,000...... 5.50% 5.82% 5.00%
$50,000 but
less than
$100,000..... 4.50% 4.71% 4.00%
$100,000 but
less than
$250,000..... 3.75% 3.90% 3.25%
$250,000 but
less than
$500,000..... 2.50% 2.56% 2.25%
$500,000 but
less than $1
million...... 2.00% 2.04% 1.80%
$1 million or
greater...... 0.00% 0.00% 0.25%*

* See sub-section entitled "Dealer Concession."

No sales charge is imposed for Shares purchased through financial intermediaries
that do not receive a reallowance of a sales charge. However, investors who
purchase Shares through a trust department, investment adviser, or other
financial intermediary may be charged a service or other fee by the financial
intermediary. Additionally, no sales charge is imposed on shareholders
designated as Liberty Life Members or on Shares purchased through "wrap
accounts" or similar programs, under which clients pay a fee for services.

DEALER CONCESSION

For sales of Shares, a dealer will normally receive up to 90% of the applicable
sales charge. Any portion of the sales charge which is not paid to a dealer will
be retained by the distributor. However, the distributor may offer to pay
dealers up to 100% of the sales charge retained by it. Such

payments may take the form of cash or promotional incentives, such as
reimbursement of certain expenses of qualified employees and their spouses to
attend informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales charge; however, the distributor will make
twelve monthly payments to the dealer totaling 0.25% of the public offering
price over the first year following the purchase. Such payments are based on the
original purchase price of Shares outstanding at each month end.

The sales charge for Shares sold other than through registered broker/dealers
will be retained by Federated Securities Corp. Federated Securities Corp. may
pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Shares.

REDUCING OR ELIMINATING
THE SALES CHARGE

The sales charge can be reduced or eliminated on the purchase of Shares through:

- quantity discounts and accumulated purchases;

- concurrent purchases;

- signing a 13-month letter of intent;

- using the reinvestment privilege; or

- purchases with proceeds from redemptions of unaffiliated investment company
shares.

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES

As shown in the table above, larger purchases reduce the sales charge paid. The
Fund will combine purchases of Shares made on the same day by the investor, the
investor's spouse, and the investor's children under age 21 when it calculates
the sales charge. In addition, the sales charge, if applicable, is reduced for
purchases made at one time by a trustee or fiduciary for a single trust estate
or a single fiduciary account.

If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $30,000 and he
purchases $20,000 more at the current public offering price, the sales charge on
the additional purchase according to the schedule now in effect would be 4.50%,
not 5.50%.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the purchase is made that Shares are already owned or that purchases are
being combined. The Fund will reduce the sales charge after it confirms the
purchases.

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge reduction, a shareholder has the
privilege of combining concurrent purchases of two or more Federated Funds, the
purchase price of which includes a sales charge. For example, if a shareholder
concurrently invested $30,000 in Class A Shares of one of the other Federated
Funds with a sales charge, and $20,000 in Class A Shares of this Fund, the sales
charge would be reduced.

To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales charge
after it confirms the purchases.

LETTER OF INTENT

If a shareholder intends to purchase at least $50,000 of shares of Federated
Funds (excluding money market funds) over the next 13 months, the sales charge
may be reduced by signing a letter of intent to that effect. This letter of
intent includes a provision for a sales charge adjustment depending on the
amount actually purchased within the 13-month period and a provision for the
custodian to hold up to 5.50% of the total amount intended to be purchased in
escrow (in Shares) until such purchase is completed.

The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period, whichever
comes first. If the amount specified in the letter of intent is not purchased,
an appropriate number of escrowed Shares may be redeemed in order to realize the
difference in the sales charge.

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Shares of any Federated Fund,
excluding money market accounts, will be aggregated to provide a purchase credit
towards fulfillment of the letter of intent. Prior trade prices will not be
adjusted.

REINVESTMENT PRIVILEGE

If Shares in the Fund have been redeemed, the shareholder has the privilege,
within 120 days, to reinvest the redemption proceeds at the next-determined net
asset value without any sales charge. Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his Shares in the Fund, there may be tax consequences.

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES

Investors may purchase Shares at net asset value, without a sales charge, with
the proceeds from the redemption of shares of an unaffiliated investment company
that were purchased or sold with a sales charge or commission and were not
distributed by Federated Securities Corp. The purchase must be made within 60
days of the redemption, and Federated Securities Corp. must be notified by the
investor in writing, or by his financial institution, at the time the purchase
is made. From time to time, the Fund may offer dealers a payment of .50 of 1.00%
for Shares purchased under this program. If Shares are purchased in this manner,
Fund purchases will be subject to a contingent deferred sales charge for one
year from the date of purchase. Shareholders will be notified prior to the
implementation of any special offering as described above.

PURCHASING SHARES THROUGH
A FINANCIAL INSTITUTION

An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders placed through a financial
institution are considered received when the Fund is notified of the purchase
order or when payment is converted into federal funds. Purchase orders through a
registered broker/dealer must be received by the broker before 4:00 p.m.
(Eastern time) and must be transmitted by the broker to the Fund before 5:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price.
Purchase orders through other financial institutions must be received by the
financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for Shares to be purchased at that day's price. It is the
financial institution's responsibility to transmit orders promptly. Financial
institutions may charge additional fees for their services.

PURCHASING SHARES BY WIRE

Once an account has been established, Shares may be purchased by wire by calling
the Fund. All information needed will be taken over the telephone, and the order
is considered received immediately. Payment for purchases which are subject to a
sales charge must be received within three business days following the order.
Payment for purchases on which no sales charge is imposed must be received
before 3:00 p.m. (Eastern time) on the next business day following the order.
Federal funds should be wired as follows: State Street Bank and Trust Company,
Boston, Massachusetts; Attn: EDGEWIRE; For Credit to: (Fund Name) (Fund Class);
(Fund Number); Account Number; Trade Date and Order Number; Group Number or
Dealer Number; Nominee or Institution Name; and ABA Number ▇▇▇▇▇▇▇▇▇. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK

Once an account has been established, Shares may be purchased by sending a check
made payable to the name of the Fund (designate class of Shares and account
number) to: Federated Shareholder Services Company, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. Orders by mail are considered received when payment by
check is converted into federal funds (normally the business day after the check
is received).

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account at
an Automated Clearing House ("ACH") member and invested in the Fund at the net
asset value next determined after an order is received by the Fund, plus the
sales charge, if applicable. Shareholders should contact their financial
institution or the Fund to participate in this program.

RETIREMENT PLANS

Fund Shares can be purchased as an investment for retirement plans or ▇▇▇
accounts. For further details, contact the Fund and consult a tax adviser.

-------------------------------------------------------

EXCHANGE PRIVILEGE

Class A shareholders may exchange all or some of their Shares for Class A Shares
of other Federated Funds at net asset value. Neither the Fund nor any of the
Federated Funds imposes any additional fees on exchanges. Shareholders in
certain other Federated Funds may exchange all or some of their shares for Class
A Shares.

Please contact your financial institution directly or Federated Securities Corp.
at 1-800-341-7400 for information on and prospectuses for the Federated Funds
into which your Shares may be exchanged free of charge.

Shareholders of Class A Shares who have been designated as Liberty Life Members
are exempt from sales charges on future purchases in and exchanges between the
Class A Shares of any Federated Funds, as long as they maintain a $500 balance
in one of the Federated Funds.

REQUIREMENTS FOR EXCHANGE

Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.

Upon receipt of proper instructions and required supporting documents, Shares
submitted for exchange are redeemed and proceeds invested in the same class of
shares of the other fund. The exchange privilege may be modified or terminated
at any time. Shareholders will be notified of the modification or termination of
the exchange privilege.

TAX CONSEQUENCES

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a capital gain or loss may be
realized.

MAKING AN EXCHANGE

Instructions for exchanges for the Federated Funds may be given in writing or by
telephone. Written instructions may require a signature guarantee. Shareholders
of the Fund may have difficulty in making exchanges by telephone through brokers
and other financial institutions during times of drastic economic or market
changes. If a shareholder cannot contact his broker or financial institution by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail to Federated Shareholder Services Company, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ -- ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.

TELEPHONE INSTRUCTIONS

Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with the Fund.
If the instructions are given by a broker, a telephone authorization form
completed by the broker must be on file with the Fund. If reasonable procedures
are not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. Shares may be exchanged between two funds by
telephone only if the two funds have identical shareholder registrations.

Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder Services Company, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and deposited to the shareholder's account before being
exchanged. Telephone exchange instructions are recorded and will be binding upon
the shareholder. Such instructions will be processed as of 4:00 p.m. (Eastern
time) and must be received by the Fund before that time for Shares to be
exchanged the same day. Shareholders exchanging into a fund will begin receiving
dividends the following business day. This privilege may be modified or
terminated at any time.

-------------------------------------------------------

HOW TO REDEEM SHARES

Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Investors who redeem shares through a financial intermediary may be
charged a service fee by that financial intermediary. Redemption requests must
be received in proper form and can be made as described below.

REDEEMING SHARES THROUGH
A FINANCIAL INSTITUTION

Shares of the Fund may be redeemed by calling your financial institution to
request the redemption. Shares will be redeemed at the net asset value, less any
applicable contingent deferred sales charge next determined after the Fund
receives the redemption request from the financial institution. Redemption
requests through a registered broker/dealer must be received by the broker
before 4:00 p.m. (Eastern time) and must be transmitted by the broker to the
Fund before 5:00 p.m. (Eastern time) in order for Shares to be redeemed at that
day's net asset value. Redemption requests through other financial institutions
(such as banks) must be received by the financial institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for Shares to be redeemed at
that day's net asset value. The financial institution is responsible for
promptly submitting redemption requests and providing proper written redemption
instructions. Customary fees and commissions may be charged by the financial
institution for this service.

REDEEMING SHARES BY TELEPHONE

Shares may be redeemed in any amount by calling the Fund provided the Fund has a
properly

completed authorization form. These forms can be obtained from Federated
Securities Corp. Proceeds will be mailed in the form of a check, to the
shareholder's address of record or by wire transfer to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System.
The minimum amount for a wire transfer is $1,000. Proceeds from redeemed Shares
purchased by check or through ACH will not be wired until that method of payment
has cleared. Proceeds from redemption requests received on holidays when wire
transfers are restricted will be wired the following business day. Questions
about telephone redemptions on days when wire transfers are restricted should be
directed to your shareholder services representative at the telephone number
listed on your account statement.

Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares By Mail" should be considered. If at any time the
Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL

Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail to the address noted above.

The written request should state: the Fund name and Class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the receipt of a proper written redemption request. Dividends
are paid up to and including the day that a redemption request is processed.

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.

SPECIAL REDEMPTION FEATURES

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder.
Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Shares, and the fluctuation
of the net asset value of Shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Fund. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have an account

value of at least $10,000, other than retirement accounts subject to required
minimum distributions. A shareholder may apply for participation in this program
through his financial institution. Due to the fact that Shares are sold with a
sales charge, it is not advisable for shareholders to continue to purchase
Shares while participating in this program.

CONTINGENT DEFERRED SALES CHARGE

Class A Shares purchased under a periodic special offering with the proceeds of
a redemption of shares of an unaffiliated investment company purchased or
redeemed with a sales charge and not distributed by Federated Securities Corp.
may be charged a contingent deferred sales charge of .50% for redemptions made
within one full year of purchase. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption.

The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than one
full year from the date of purchase. Redemptions will be processed in a manner
intended to maximize the amount of redemption which will not be subject to a
contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than one full year from the
date of purchase; (3) Shares held for less than one full year from the date of
purchase on a first-in, first-out basis. A contingent deferred sales charge is
not assessed in connection with an exchange of Fund Shares for shares of other
funds in the Federated Funds in the same class (see "Exchange Privilege"). Any
contingent deferred sales charge imposed at the time the exchanged-for Shares
are redeemed is calculated as if the shareholder had held the shares from the
date on which he became a shareholder of the exchanged-from Shares. Moreover,
the contingent deferred sales charge will be eliminated with respect to certain
redemptions (see "Elimination of Contingent Deferred Sales Charge").

ELIMINATION OF CONTINGENT
DEFERRED SALES CHARGE

other financial institution, to the extent that no payments were advanced for
purchases made through such entities. The Directors reserve the right to
discontinue elimination of the contingent deferred sales charge. Shareholders
will be notified of such elimination. Any Shares purchased prior to the
termination of such waiver would have the contingent deferred sales charge
eliminated as provided in the Fund's prospectus at the time of the purchase of
the Shares. If a shareholder making a redemption qualifies for an elimination of
the contingent deferred sales charge, the shareholder must notify Federated
Securities Corp. or the transfer agent in writing that he is entitled to such
elimination.

-------------------------------------------------------

ACCOUNT AND SHARE INFORMATION

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Shareholder Services Company maintains
a Share account for each shareholder. Share certificates are not issued unless
requested in writing to Federated Shareholder Services Company.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS

Dividends are declared and paid annually to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional Shares of the Fund on payment dates at the ex-dividend
date net asset value without a sales charge, unless shareholders request cash
payments on the new account form or by contacting the transfer agent. All
shareholders on the record date are entitled to the dividend. If Shares are
redeemed or exchanged prior to the record date or purchased after the record
date, those Shares are not entitled to that year's dividend.

CAPITAL GAINS

Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$500. This requirement does not apply, however, if the balance falls below the
required minimum value because of changes in the net asset value of Shares.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.

-------------------------------------------------------

CORPORATION INFORMATION

MANAGEMENT OF THE CORPORATION

BOARD OF DIRECTORS

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

INVESTMENT ADVISER

Investment decisions for the Fund are made by the Fund's investment adviser,
Federated Global Research Corp. (the "Adviser"), subject to direction by the
Directors. The Adviser continually conducts investment research and supervision
for the Fund and is responsible for the purchase or sale of portfolio
instruments, for which it receives an annual fee from the Fund. The Adviser's
address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to 1.25% of the
Fund's average daily net assets. The fee paid by the Fund, while higher than the
advisory fee paid by other mutual funds in general, is comparable to fees paid
by other mutual funds with similar objectives and policies. Under the investment
advisory contract, which provides for the voluntary waiver of the advisory fee
by the Adviser, the Adviser may voluntarily waive some or all of its fee. This
does not include reimbursement to the Fund of any expenses incurred by
shareholders who use the transfer agent's subaccounting facilities. The Adviser
can

terminate this voluntary waiver at any time in its sole discretion.

ADVISER'S BACKGROUND

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

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $76 billion invested across more than
338 funds under management and/or administration by its subsidiaries, as of
December 31, 1996, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in 1955.
Federated funds are presently at work in and through 4,500 financial
institutions nationwide.

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ has been the Fund's portfolio manager since its inception. ▇▇.
▇▇▇▇▇▇▇▇ joined Federated Investors in 1995 as an Executive Vice President of
the Fund's investment adviser. ▇▇. ▇▇▇▇▇▇▇▇ served as Chief Investment Officer
of international equities at ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co. from 1992 until 1995.
He was the Executive Vice President and Director of Equities at ▇▇▇▇▇▇▇▇▇▇▇
Management Corporation from 1989 to 1991.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has been the Fund's portfolio manager since its inception. ▇▇.
▇▇▇▇▇▇▇ joined Federated Investors in 1995 as a Senior Vice President of the
Fund's investment adviser. ▇▇. ▇▇▇▇▇▇▇ served as Vice President/Portfolio
Manager of international equity portfolios at ▇▇▇▇▇▇ and S. Bleichroeder, Inc.
from 1994 to 1995. He served as an Assistant Vice President/Portfolio Manager
for international equities at the College Retirement Equities Fund from 1986 to
1994. ▇▇. ▇▇▇▇▇▇▇ is a Chartered Financial Analyst and received his M.B.A. in
Finance from the University of Pennsylvania.

▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ has been the Fund's portfolio manager since its inception.
▇▇. ▇▇ ▇▇▇▇▇▇▇▇ joined Federated Investors in 1995 as a Vice President of the
Fund's investment adviser. ▇▇. ▇▇ ▇▇▇▇▇▇▇▇ served as Assistant Vice
President/Portfolio Manager for Japanese and Korean equities at the College
Retirement Equities Fund from 1994 to 1995. He served as an International
Equities Analyst and then as an Assistant Portfolio Manager at the College
Retirement Equities Fund between 1987 and 1994. ▇▇. ▇▇ ▇▇▇▇▇▇▇▇ received his
M.B.A. in Finance from Duke University.

Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securi-

ties held for less than sixty days. Violations of the codes are subject to
review by the Board of Directors, and could result in severe penalties.

DISTRIBUTION OF CLASS A SHARES

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

DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), the distributor may be paid a fee in an amount
computed at an annual rate of up to .25% of the average daily net assets of
Shares to finance any activity which is principally intended to result in the
sale of Shares subject to the Distribution Plan. The Fund does not currently
make payments to the distributor or charge a fee under the Distribution Plan for
Shares, and shareholders will be notified if the Fund intends to charge a fee
under the Distribution Plan. For Shares, the distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales services or distribution-related
support services as agents for their clients or customers.

The Distribution Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Distribution Plan.

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to .25% of the average daily net asset value of
Shares to obtain certain personal services for shareholders and for the
maintenance of shareholder accounts ("Shareholder Services"). Under the
Shareholder Services Agreement, Federated Shareholder Services will either
perform Shareholder Services directly or will select financial institutions to
perform Shareholder Services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.

In addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of sales services, distribution-related support
services, or shareholder services.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS

Federated Securities Corp. will pay financial institutions, at the time of
purchase, an amount equal to .50% of the net asset value of Shares purchased by
their clients or customers under certain qualified retirement plans as approved
by Federated Securities Corp. (Such payments are subject to a reclaim from the
financial institution should the assets leave the program within 12 months after
purchase.)

Furthermore, Federated Securities Corp. and Federated Shareholder Services may
offer to pay a fee from their own assets to financial institutions as financial
assistance for providing substantial marketing and sales support. The support
may include sponsoring sales, educational and training seminars for their
employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's Adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all Federated Funds as specified below:

MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
------------------- --------------------------------

.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750
million

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

EXPENSES OF THE FUND AND
CLASS A SHARES

Holders of Shares pay their allocable portion of Corporation and portfolio
expenses.

The Corporation expenses for which holders of Class A Shares pay their allocable
portion include, but are not limited to: the cost of organizing the Corporation
and continuing its existence; registering the Corporation with federal and state
securities authorities; Directors' fees; auditors' fees; the cost of meetings of
Directors; legal fees of the Corporation; association membership dues; and such
non-recurring and extraordinary items as may arise from time to time.

The portfolio expenses for which holders of Class A Shares pay their allocable
portion include, but are not limited to: registering the portfolio and Class A
Shares of the portfolio; investment advisory services; taxes and commissions;
custodian fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise from time to time.

At present, the only expenses which are allocated specifically to Class A Shares
as a class are expenses under the Corporation's Distribution Plan and fees for
Shareholder Services. However, the Directors reserve the right to allocate
certain other expenses to holders of Class A Shares as they deem appropriate
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Class A Shares; printing and postage expenses related
to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and to state securities commissions; expenses
related to administrative personnel and services as required to support holders
of Class A Shares; legal fees relating solely to Class A Shares; and Directors'

fees incurred as a result of issues related solely to Class A Shares.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling Shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Directors.

-------------------------------------------------------

SHAREHOLDER INFORMATION

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All shares of each fund or
class in the Corporation have equal voting rights, except that in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote.

As a Maryland corporation, the Corporation is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Corporation's or the Fund's operation and for the election of
Directors under certain circumstances.

Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Corporation's
outstanding shares of all series entitled to vote.

-------------------------------------------------------

TAX INFORMATION

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Code applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. However, the Fund may invest
in the stock of certain foreign corporations which would constitute a Passive
Foreign Investment Company ("PFIC"). Federal income taxes may be imposed on the
Fund upon disposition of PFIC investments.

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

Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemptions on this income. The effective rate of foreign
tax cannot be predicted since the amount of Fund assets to be invested within
various countries is unknown. However, the Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an ▇▇▇ or qualified retirement plan until distributed.

Due to differences in the book and tax treatment of fixed income securities
denominated in foreign currencies, it is difficult to project currency effects
on an interim basis. Therefore, to the extent that currency fluctuations cannot
be anticipated, a portion of distributions to shareholders could later be
designated as a return of capital, rather than income, for income tax purposes,
which may be of particular concern to simple trusts.

If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Furthermore,
shareholders who elect to deduct their portion of the Fund's foreign taxes
rather than take the foreign tax credit must itemize deductions on their income
tax returns.

STATE AND LOCAL TAXES
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

-------------------------------------------------------

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for Class A
Shares.

Total return represents the change, over a specific period of time, in the value
of an investment in Class A Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

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

The performance information reflects the effect of non-recurring charges, such
as the maximum sales charge or contingent deferred sales charges, which, if
excluded, would increase the total return and yield.

Total return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares.

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

-------------------------------------------------------

OTHER CLASSES OF SHARES

As of the date of this prospectus, the Fund also offers two other classes of
shares called Class B Shares and Class C Shares. This prospectus relates only to
Class A Shares.

Class B Shares are sold primarily to customers of financial institutions,
subject to a maximum contingent deferred sales charge of 5.50%. The Fund has
also adopted a Distribution Plan whereby the distributor is paid a fee of up to
.75% and a Shareholder Services fee of up to .25% of the Class B Shares' average
daily net assets with respect to Class B Shares. Investments in Class B Shares
are subject to a minimum initial investment of $1,500, unless the investment is
in a retirement account, in which case the minimum investment is $50.

Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales charge. Class C Shares are distributed
pursuant to a Distribution Plan adopted by the Fund whereby the distributor is
paid a fee of up to .75%, in addition to a Shareholder Services fee of up to
.25% of the Class C Shares' average daily net assets. In addition, Class C
Shares may be subject to certain contingent deferred sales charges. Investments
in Class C Shares are subject to a minimum initial investment of $1,500, unless
the investment is in a retirement account, in which case the minimum investment
is $50.

Class A Shares, Class B Shares, and Class C Shares are subject to certain of the
same expenses. Expense differences, however, among Class A Shares, Class B
Shares, and Class C Shares may affect the performance of each class.

To obtain more information and a prospectus for either Class B Shares or Class C
Shares, investors may call ▇-▇▇▇-▇▇▇-▇▇▇▇ or contact their financial
institution.

-------------------------------------------------------

APPENDIX

STANDARD AND POOR'S
RATINGS GROUP LONG TERM
DEBT RATING DEFINITIONS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's Ratings
Group. Capacity to pay interest and repay principal is extremely strong.

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

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

BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.

B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-rating.

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

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt ratings. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

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

▇▇▇▇▇'▇ INVESTORS SERVICE, INC.
LONG TERM BOND RATING
DEFINITIONS

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

AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally

known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in AAA securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in AAA
securities.

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

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

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

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

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

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

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

FITCH INVESTORS SERVICE, INC.
LONG-TERM DEBT RATING
DEFINITIONS

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

AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

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

BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

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

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

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

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

▇▇▇▇▇'▇ INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATINGS

PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:

-- Leading market positions in well established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

-- Broad margins in earning coverage of fixed financial charges and high
internal cash generation.

-- Well established access to a range of financial markets and assured sources
of alternate liquidity.

PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

STANDARD AND POOR'S RATINGS
GROUP COMMERCIAL PAPER
RATINGS

A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

FITCH INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATING
DEFINITIONS

FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

------------------------------------------------------
------------------------------------------------------

ADDRESSES

FEDERATED LATIN AMERICAN GROWTH FUND
CLASS A SHARES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

DISTRIBUTOR

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

INVESTMENT ADVISER

Federated Global Research Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

CUSTODIAN

State Street Bank and Trust Company
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT

Federated Shareholder Services Company
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

INDEPENDENT AUDITORS

Ernst & Young LLP
One Oxford Centre
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
FEDERATED LATIN AMERICAN
GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT
SERIES, INC.)
CLASS A SHARES
PROSPECTUS

An Open-End, Diversified
Management Investment Company

January 31, 1997

LOGO
Cusip 981487 796

G01471-01 (1/97)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
FEDERATED LATIN AMERICAN GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS

The shares of Federated Latin American Growth Fund (the "Fund") represent
interests in a diversified portfolio of World Investment Series, Inc. (the
"Corporation"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to provide long-term growth of capital. Any
income received from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in equity securities of Latin
American companies.

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

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information dated January 31,
1997, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Fund are maintained electronically with the SEC at Internet Web site
(▇▇▇▇://▇▇▇.▇▇▇.▇▇▇).

Prospectus dated January 31, 1997

-------------------------------------------------------
-------------------------------------------------------

TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1

Financial Highlights...........................................................4

Synopsis.......................................................................7

Investment Information.........................................................8

Investment Objective.........................................................8

Investment Policies..........................................................8

Investment Limitations......................................................18

Net Asset Value...............................................................19

Investing in the Fund.........................................................20

How to Purchase Shares........................................................21

Investing in Class A Shares.................................................21

Investing in Class B Shares.................................................23

Investing in Class C Shares.................................................24

Special Purchase Features...................................................25

Exchange Privilege............................................................26

How to Redeem Shares..........................................................27

Special Redemption Features.................................................28

Contingent Deferred Sales Charge............................................29

Elimination of Contingent Deferred
Sales Charge.............................................................30

Account and Share Information.................................................31

Corporation Information.......................................................32

Management of the Corporation...............................................32

Distribution of Shares......................................................33

Administration of the Fund..................................................35

Expenses of the Fund and
Class A Shares, Class B Shares,
and Class C Shares.......................................................35

Brokerage Transactions......................................................36

Shareholder Information.......................................................36

Voting Rights...............................................................36

Tax Information...............................................................37

Federal Income Tax..........................................................37

State and Local Taxes.......................................................37

Performance Information.......................................................38

Appendix......................................................................39

Addresses.....................................................................42

-------------------------------------------------------
-------------------------------------------------------

SUMMARY OF FUND EXPENSES

FEDERATED LATIN AMERICAN GROWTH FUND

CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................. 5.50%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)...... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)(1)...................................................... 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(2).............................................................. 0.00%
12b-1 Fee(3).................................................................................. 0.00%
Total Other Expenses.......................................................................... 1.97%
Shareholder Services Fee......................................................... 0.25%
Total Operating Expenses(4).......................................................... 1.97%

(3) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1997. If Class A Shares were
paying or accruing the 12b-1 fee, Class A Shares would be able to pay up to
0.25% of its average daily net assets for the 12b-1 fee. See "Corporation
Information."

(4) The operating expenses are estimated to be 8.93% absent the voluntary waiver
of the management fee and the voluntary reimbursement of certain other
operating expenses.

EXAMPLE 1 year 3 years 5 years 10 years
----------------------------------------------------------------- ------ ------- ------- --------

You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return, (2) redemption at the end of
each time period, and (2) payment of the maximum sales
charge......................................................... $ 74 $ 113 $ 155 $272

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

-------------------------------------------------------
-------------------------------------------------------

SUMMARY OF FUND EXPENSES

FEDERATED LATIN AMERICAN GROWTH FUND

CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................. None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)...... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)(1)...................................................... 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(2).............................................................. 0.00%
12b-1 Fee..................................................................................... 0.75%
Total Other Expenses.......................................................................... 1.97%
Shareholder Services Fee......................................................... 0.25%
Total Operating Expenses(3)(4)....................................................... 2.72%

(1) The contingent deferred sales charge is 5.50% in the first year declining to
1.00% in the sixth year and 0.00% thereafter. (See "Contingent Deferred
Sales Charge.")

(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

(4) The total operating expenses would have been 9.68% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Corporation Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.

EXAMPLE 1 year 3 years 5 years 10 years
----------------------------------------------------------------- ------ ------- ------- --------

You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return, (2) redemption at the end of each
time period, and (3) payment of the maximum sales charge......... $ 84 $ 127 $ 166 $286
You would pay the following expenses on the same investment,
assuming no redemption........................................... $ 28 $ 84 $ 144 $286

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

-------------------------------------------------------
-------------------------------------------------------

SUMMARY OF FUND EXPENSES

FEDERATED LATIN AMERICAN GROWTH FUND

CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................. None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)...... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)(1)...................................................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(2).............................................................. 0.00%
12b-1 Fee..................................................................................... 0.75%
Total Other Expenses.......................................................................... 1.97%
Shareholder Services Fee......................................................... 0.25%
Total Operating Expenses(3).......................................................... 2.72%

(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within one
year of their purchase date. (See "Contingent Deferred Sales Charge.")

(3) The operating expenses would have been 9.68% absent the voluntary waiver of
the management fee and the voluntary reimbursement of certain other
operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Corporation Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.

EXAMPLE 1 year 3 years 5 years 10 years
----------------------------------------------------------------- ------ ------- ------- --------

You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return, (2) redemption at the end of each
time period, and (3) payment of maximum sales charge............. $ 38 $84 $ 144 $305
You would pay the following expenses on the same investment,
assuming no redemption........................................... $ 28 $84 $ 144 $305

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

-------------------------------------------------------
-------------------------------------------------------

FINANCIAL HIGHLIGHTS--CLASS A SHARES

FEDERATED LATIN AMERICAN GROWTH FUND

--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 17, 1997 on the Fund's
financial statements for the period ended November 30, 1996, and the following
table for the period presented, is included in the Annual Report which is
incorporated by reference herein. This table should be read in conjunction with
the Fund's financial statements and notes thereto, which may be obtained from
the Fund.

PERIOD ENDED
NOVEMBER 30, 1996(A)
---------------------

NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------------------------------
Net investment income 0.12
-------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 1.44
------------------------------------------------------------------------- -------------
Total from investment operations 1.56
------------------------------------------------------------------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.56
------------------------------------------------------------------------- -------------
TOTAL RETURN (B) 15.60%
-------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------
Expenses 1.97%*
-------------------------------------------------------------------------
Net investment income 1.49%*
-------------------------------------------------------------------------
Expense waiver/reimbursement (c) 6.96%*
-------------------------------------------------------------------------
SUPPLEMENTAL DATA
-------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,836
-------------------------------------------------------------------------
Average commission rate paid $0.0001
-------------------------------------------------------------------------
Portfolio turnover 38%
-------------------------------------------------------------------------

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated November 30, 1996, which can be obtained free of charge.

-------------------------------------------------------
-------------------------------------------------------

FINANCIAL HIGHLIGHTS--CLASS B SHARES

FEDERATED LATIN AMERICAN GROWTH FUND

--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 17, 1997 on the Fund's
financial statements for the period ended November 30, 1996, and the following
table for the period presented, is included in the Annual Report which is
incorporated by reference herein. This table should be read in conjunction with
the Fund's financial statements and notes thereto, which may be obtained from
the Fund.

PERIOD ENDED
NOVEMBER 30, 1996(A)
---------------------

NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------------------------------
Net operating loss (0.05)
-------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 1.55
------------------------------------------------------------------------- -------------
Total from investment operations 1.50
------------------------------------------------------------------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.50
------------------------------------------------------------------------- -------------
TOTAL RETURN (B) 15.00%
-------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------
Expenses 2.72%*
-------------------------------------------------------------------------
Net operating loss (1.20%)*
-------------------------------------------------------------------------
Expense waiver/reimbursement (c) 6.96%*
-------------------------------------------------------------------------
SUPPLEMENTAL DATA
-------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,355
-------------------------------------------------------------------------
Average commission rate paid $0.0001
-------------------------------------------------------------------------
Portfolio turnover 38%
-------------------------------------------------------------------------

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated November 30, 1996, which can be obtained free of charge.

-------------------------------------------------------
-------------------------------------------------------

FINANCIAL HIGHLIGHTS--CLASS C SHARES

FEDERATED LATIN AMERICAN GROWTH FUND

--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 17, 1997 on the Fund's
financial statements for the period ended November 30, 1996, and the following
table for the period presented, is included in the Annual Report which is
incorporated by reference herein. This table should be read in conjunction with
the Fund's financial statements and notes thereto, which may be obtained from
the Fund.

PERIOD ENDED
NOVEMBER 30, 1996(A)
---------------------

NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------------------------------
Net operating loss (0.08)
-------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 1.56
------------------------------------------------------------------------- -------------
Total from investment operations 1.48
------------------------------------------------------------------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.48
------------------------------------------------------------------------- -------------
TOTAL RETURN (B) 14.80%
-------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------
Expenses 2.72%*
-------------------------------------------------------------------------
Net operating loss (1.30%)*
-------------------------------------------------------------------------
Expense waiver/reimbursement (c) 6.96%*
-------------------------------------------------------------------------
SUPPLEMENTAL DATA
-------------------------------------------------------------------------
Net assets, end of period (000 omitted) $260
-------------------------------------------------------------------------
Average commission rate paid $0.0001
-------------------------------------------------------------------------
Portfolio turnover 38%
-------------------------------------------------------------------------

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated November 30, 1996, which can be obtained free of charge.

-------------------------------------------------------

SYNOPSIS

The Corporation was established under the laws of the state of Maryland on
January 25, 1994. The Corporation's address is Federated ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The Articles of Incorporation permit the
Corporation to offer separate series of shares representing interests in
separate portfolios of securities. As of the date of this prospectus, the Board
of Directors (the "Directors") has established three classes of shares for the
Fund, known as Class A Shares, Class B Shares, and Class C Shares (individually
and collectively as the context requires, "Shares").

Shares of the Fund are designed for individuals and institutions seeking
long-term growth of capital by investing primarily in equity securities of Latin
American companies.

Class B Shares are sold at net asset value. A contingent deferred sales charge
is imposed on certain Shares which are redeemed within six full years of
purchase. See "How to Redeem Shares."

Class C Shares are sold at net asset value. A contingent deferred sales charge
of 1.00% will be charged on assets redeemed within the first 12 months following
purchase. See "How to Redeem Shares."

In addition, the Fund also pays a shareholder services fee at an annual rate not
to exceed 0.25% of average daily net assets.

Additionally, information regarding the exchange privilege offered with respect
to the Fund and certain other funds for which affiliates of Federated Investors
serve as investment adviser or principal underwriter (the "Federated Funds") can
be found under "Exchange Privilege."

Federated Global Research Corp. is the investment adviser (the "Adviser") to the
Fund and receives compensation for its services. The Adviser's address is ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.

The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Federated."

-------------------------------------------------------

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

Although the Fund may invest in securities of issuers located in any country in
Latin America, the Fund expects to focus its investments in the most developed
capital markets of Latin America, which currently include: Argentina, Bolivia,
Brazil, Chile, Colombia, Mexico, Peru, Uruguay, and Venezuela. The Fund may
invest in other countries of Latin America when their markets become
sufficiently developed, in the opinion of the Adviser. The Fund intends to
allocate its investments among at least three countries at all times and does
not expect to concentrate investments in any particular industry.

ACCEPTABLE INVESTMENTS

COMMON AND PREFERRED STOCK

In selecting securities, the Adviser typically evaluates industry trends, a
company's financial strength, its competitive position in domestic and export
markets, technology, recent developments and profitability, together with
overall growth prospects. Other considerations generally include quality and
depth of management, government regulation, and availability and cost of labor
and raw materials. Investment decisions are made without regard to arbitrary
criteria as to minimum asset size, debt-equity ratios or dividend history of
portfolio companies.

DEPOSITARY RECEIPTS

DEBT SECURITIES
In pursuit of the Fund's objective of long-term growth of capital, the Fund may
invest up to 35% of its total assets in debt securities. Capital appreciation in
debt securities may arise as a result of favorable changes in the
creditworthiness of issuers, relative interest rate levels, or relative foreign
exchange rates. Any income received from debt securities is incidental to the
Fund's objective of long-term growth of capital. These debt obligations consist
of U.S. and foreign government securities and corporate debt securities,
including, but not limited to, Yankee bonds, Eurobonds and depositary receipts.
The issuers of such debt securities may or may not be domiciled in Latin
America.

The debt securities in which the Fund may invest may be rated, at the time of
purchase, as low as C by Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch") or ▇▇▇▇▇'▇ Investors Service, Inc.
("Moody's"), or, if unrated, are of comparable quality as determined by the
Adviser. Such debt securities are commonly known as "junk bonds." The prices of
fixed income securities generally fluctuate inversely to the direction of
interest rates. Please refer to the Appendix in this prospectus for a
description of these ratings.

CONVERTIBLE SECURITIES

The Fund may invest in convertible securities rated, at the time of purchase, as
low as C by S&P or Fitch or Moody's, or, if unrated, are of comparable quality
as determined by the Adviser.

Convertible securities are fixed income securities which may be exchanged or
converted into a predetermined number of the issuer's underlying common stock at
the option of the holder during a specified time period. Convertible securities
may take the form of convertible bonds, convertible preferred stock or
debentures, units consisting of "usable" bonds and warrants or a combination of
the features of several of these securities. The investment characteristics of
each convertible security vary widely, which allows convertible securities to be
employed for a variety of different investment strategies. In selecting a
convertible security, the Adviser evaluates the investment characteristics of
the convertible security as a fixed income investment, and the investment
potential of the underlying security for capital appreciation.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

RESTRICTED AND ILLIQUID SECURITIES

originally paid by the Fund, or less than what may be considered the fair value
of such securities. Further, companies whose securities are not publicly traded
may not be subject to the disclosure and other investor protection requirements
which might be applicable if their securities were publicly traded. If such
securities are required to be registered under the securities laws of one or
more jurisdictions before being resold, the Fund may be required to bear the
expense of registration. The Fund will limit investments in illiquid securities,
including certain restricted securities not determined by the Directors to be
liquid, over-the counter options, swap agreements not determined to be liquid,
and repurchase agreements providing for settlement in more than seven days after
notice, to 15% of its net assets.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements. Repurchase agreements are
arrangements by which the Fund purchases a security for cash and obtains a
simultaneous commitment from the seller (usually a bank or broker/dealer) to
repurchase the security at an agreed-upon price and specified future date. The
repurchase price reflects an agreed-upon interest rate for the time period of
the agreement. The Fund's risk is the inability of the seller to pay the
agreed-upon price on the delivery date. However, this risk is tempered by the
ability of the Fund to sell the security in the open market in the case of a
default. In such a case, the Fund may incur costs in disposing of the security
which would increase Fund expenses. The Adviser will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

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

LENDING OF PORTFOLIO SECURITIES

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

TEMPORARY INVESTMENTS

For temporary defensive purposes, when the Adviser determines that market
conditions warrant (up to 100% of total assets) and to maintain liquidity (up to
35% of total assets), the Fund may invest in U.S. and foreign debt instruments
as well as cash or cash equivalents, including foreign and domestic money market
instruments, short-term government and corporate obligations, and repurchase
agreements.

FORWARD COMMITMENTS

FOREIGN CURRENCY TRANSACTIONS

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the Adviser
will consider the likelihood of changes in currency values when making
investment decisions, the Adviser believes that it is important to be able to
enter into forward contracts when it believes the interests of the Fund will be
served. The Fund will not enter into forward contracts for

hedging purposes in a particular currency in an amount in excess of the value of
the Fund's assets denominated in that currency at the time the contract was
initiated, but as consistent with their other investment policies and as not
otherwise limited in their ability to use this strategy.

OPTIONS

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

FUTURES AND OPTIONS ON FUTURES

The Fund may enter into futures contracts involving foreign currency,
securities, and securities indices, or options thereon, for bona fide hedging
purposes. The Fund may also enter into such futures contracts or related options
for purposes other than bona fide hedging if the aggregate amount of initial
margin deposits exclusive of the margin needed for foreign currency hedging, on
the Fund's futures and related options positions would not exceed 5% of the net
liquidation value of the Fund's assets, provided further that in the case of an
option that is in-the-money at the time of the purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. In addition, the Fund may not
sell futures contracts if the value of such futures contracts exceeds the total
market value of the Fund's portfolio securities. Futures contracts and options
thereon sold by the Fund are generally subject to segregation and coverage
requirements established by either the Commodities Futures Trading Commission
("CFTC") or the Securities and Exchange Commission ("SEC"), with the result
that, if the Fund

does not hold the instrument underlying the futures contract or option, the Fund
will be required to segregate on an ongoing basis with its custodian cash, U.S.
government securities, or other liquid high grade debt obligations in an amount
at least equal to the Fund's obligations with respect to such instruments.

The Fund may enter into securities index futures contracts to sell a securities
index in anticipation of or during a market decline to attempt to offset the
decrease in market value of securities in its portfolio that might otherwise
result. When the Fund is not fully invested and anticipates a significant market
advance, it may enter into futures contracts to purchase the index in order to
gain rapid market exposure that may in part or entirely offset increases in the
cost of securities that it intends to purchase. In many of these transactions,
the Fund will purchase such securities upon termination of the futures position
but, depending on market conditions, a futures position may be terminated
without the corresponding purchases of common stock. The Fund may also invest in
securities index futures contracts when the Adviser believes such investment is
more efficient, liquid, or cost-effective than investing directly in the
securities underlying the index.

An option on a securities index futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a securities index
futures contract. The Fund may purchase and write put and call options on
securities index futures contracts in order to hedge all or a portion of its
investment and may enter into closing purchase transactions with respect to
written options in order to terminate existing positions. There is no guarantee
that such closing transactions can be effected. The Fund may also invest in
options on securities index futures contracts when the Adviser believes such
investment is more efficient, liquid or cost-effective than investing directly
in the futures contract or in the securities underlying the index, or when the
futures contract or underlying securities are not available for investment upon
favorable terms.

The use of futures and related options involves special consideration and risks,
for example, (1) the ability of the Fund to utilize futures successfully will
depend on the Adviser's ability to predict pertinent market movements; (2) there
might be imperfect correlation, or even no correlation, between the change in
market value of the securities held by the Fund and the prices of the futures
and options thereon relating to the securities purchased or sold by the Fund.
The use of futures and related options may reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements but they
can also reduce the opportunity for gain by offsetting the positive effect of
favorable price movements in positions. No assurance can be given that the
Adviser's judgment in this respect will be correct.

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

close out futures and options positions depends on this secondary market.

New futures contracts, options thereon, and other financial products and risk
management techniques continue to be developed. The Fund may use these
investments and techniques to the extent consistent with its investment
objective and regulatory and federal tax considerations.

RISKS OF FUTURES AND
OPTIONS TRANSACTIONS

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

SWAP AGREEMENTS

RISK CHARACTERISTICS OF

FOREIGN SECURITIES

tinue to be, adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These economies
also have been, and may continue to be, adversely affected by economic
conditions in the countries with which they trade.

CURRENCY RISKS

Fund values its assets daily in U.S. dollars, the Fund will not convert its
holdings of foreign currencies to U.S. dollars daily. When the Fund converts its
holdings to another currency, it may incur conversion costs. Foreign exchange
dealers may realize a profit on the difference between the price at which they
buy and sell currencies.

FOREIGN COMPANIES

Other differences between investing in foreign and U.S. companies include:

- less publicly available information about foreign issuers;

- credit risks associated with certain foreign governments;

- the lack of uniform accounting, auditing, and financial reporting standards
and practices or regulatory requirements comparable to those applicable to
U.S. companies;

- less readily available market quotations on foreign issues;
- differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;

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

- the likelihood that securities of foreign issuers may be less liquid or more
volatile;

- foreign brokerage commissions may be higher;

- unreliable mail service between countries;

- political or financial changes which adversely affect investments in some
countries;

- increased risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities;

- certain markets may require payment for securities before delivery;

- religious and ethnic instability; and

- certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests.

U.S. GOVERNMENT POLICIES

INVESTING IN LATIN AMERICA

The Adviser believes that investment opportunities may result from recent trends
in Latin America encouraging greater market orientation and less governmental
intervention in economic affairs. Investors, however, should be aware that the
Latin American economies have experienced considerable difficulties in the past
decade. Although there have been significant improvements in recent years, the
Latin American economies continue to experience challenging problems, including
high inflation rates and high interest rates relative to the U.S. The emergence
of the Latin American economies and securities markets will require continued
economic and fiscal discipline which has been lacking at times in the past, as
well as stable political and social conditions. Recovery may also be influenced
by international economic conditions, particularly those in the U.S., and by
world prices for oil and other commodities. There is no assurance that recent
economic initiatives will be successful.

RISK FACTORS RELATING
TO INVESTING IN HIGH YIELD
SECURITIES

The Fund's Adviser attempts to reduce the risks described above through
diversification of the portfolio and by credit analysis of each issuer as well
as by monitoring broad economic trends and corporate and legislative
developments.

INVESTMENT LIMITATIONS

The Fund will not:

- borrow money directly or through reverse repurchase agreements (arrangements
in which the Fund sells a portfolio instrument for a per-

centage of its cash value with an agreement to buy it back on a set date) or
pledge securities except, under certain circumstances, the Fund may borrow up
to one-third of the value of its total assets and pledge its assets to secure
such borrowings; or

The above investment limitations cannot be changed without shareholder approval.

-------------------------------------------------------

NET ASSET VALUE

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of each class of Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of each
class of Shares in the liabilities of the Fund and those attributable to each
class of Shares, and dividing the remainder by the total number of each class of
Shares outstanding. The net asset value for each class of Shares may differ due
to the variance in daily net income realized by each class. Such variance will
reflect only accrued net income to which the shareholders of a particular class
are entitled.

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

-------------------------------------------------------
INVESTING IN THE FUND

The Fund offers investors three classes of Shares that carry sales charges and
contingent deferred sales charges in different forms and amounts and which bear
different levels of expenses.

CLASS A SHARES

An investor who purchases Class A Shares pays a maximum sales charge of 5.50% at
the time of purchase. As a result, Class A Shares are not subject to any charges
when they are redeemed (except for special programs offered under "Purchases
with Proceeds From Redemptions of Unaffiliated Investment Companies"). Certain
purchases of Class A Shares are not subject to a sales charge. See "Investing in
Class A Shares." Certain purchases of Class A Shares qualify for reduced sales
charges. See "Reducing or Eliminating the Sales Charge." Class A Shares have no
conversion feature.

CLASS B SHARES

Class B Shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 5.50% if redeemed within six full
years following purchase. Class B Shares also bear a higher 12b-1 fee than Class
A Shares. Class B Shares will automatically convert into Class A Shares, based
on relative net asset value, on or around the fifteenth of the month eight full
years after the purchase date. Class B Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but (until conversion) will have a higher expense ratio and pay lower
dividends than Class A Shares due to the higher 12b-1 fee.

CLASS C SHARES

Class C Shares are sold without an initial sales charge, but are subject to a
1.00% contingent deferred sales charge on assets redeemed within the first 12
months following purchase. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but will have a higher expense ratio and pay lower dividends than Class A
Shares due to the higher 12b-1 fee. Class C Shares have no conversion feature.

-------------------------------------------------------

HOW TO PURCHASE SHARES

Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500 for Class A Shares and $1,500 for
Class B Shares and Class C Shares. Additional investments can be made for as
little as $100. The minimum initial and subsequent investment for retirement
plans is only $50. (Financial institutions may impose different minimum
investment requirements on their customers.)

INVESTING IN CLASS A SHARES

Class A Shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:

Less than
$50,000..... 5.50% 5.82% 5.00%
$50,000 but
less than
$100,000.... 4.50% 4.71% 4.00%
$100,000 but
less than
$250,000.... 3.75% 3.90% 3.25%
$250,000 but
less than
$500,000.... 2.50% 2.56% 2.25%
$500,000 but
less than $1
million..... 2.00% 2.04% 1.80%
$1 million or
greater..... 0.00% 0.00% 0.25%*

* See sub-section entitled "Dealer Concession."

No sales charge is imposed for Class A Shares purchased through financial
intermediaries that do not receive a reallowance of a sales charge. However,
investors who purchase Shares through a trust department, investment adviser, or
other financial intermediary may be charged a service or other fee by the
financial intermediary. Additionally, no sales charge is imposed on shareholders
designated as Liberty Life Members or on Class A Shares purchased through "wrap
accounts" or similar programs, under which clients pay a fee for services.

DEALER CONCESSION

up to 100% of the sales charge retained by it. Such payments may take the form
of cash or promotional incentives, such as reimbursement of certain expenses of
qualified employees and their spouses to attend informational meetings about the
Fund or other special events at recreational-type facilities, or items of
material value. In some instances, these incentives will be made available only
to dealers whose employees have sold or may sell a significant amount of Shares.
On purchases of $1 million or more, the investor pays no sales charge; however,
the distributor will make twelve monthly payments to the dealer totaling 0.25%
of the public offering price over the first year following the purchase. Such
payments are based on the original purchase price of Shares outstanding at each
month end.

REDUCING OR ELIMINATING THE SALES CHARGE

The sales charge can be reduced or eliminated on the purchase of Class A Shares
through:

- quantity discounts and accumulated purchases;

- concurrent purchases;

- signing a 13-month letter of intent;

- using the reinvestment privilege; or

- purchases with proceeds from redemptions of unaffiliated investment company
shares.

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES

As shown in the table above, larger purchases reduce the sales charge paid. The
Fund will combine purchases of Class A Shares made on the same day by the
investor, the investor's spouse, and the investor's children under age 21 when
it calculates the sales charge. In addition, the sales charge, if applicable, is
reduced for purchases made at one time by a trustee or fiduciary for a single
trust estate or a single fiduciary account.

If an additional purchase of Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $30,000 and he purchases $20,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 4.50%, not 5.50%.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.

CONCURRENT PURCHASES

To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at

the time the concurrent purchases are made. The Fund will reduce the sales
charge after it confirms the purchases.

LETTER OF INTENT

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of any Federated
Funds, excluding money market accounts, will be aggregated to provide a purchase
credit towards fulfillment of the letter of intent. Prior trade prices will not
be adjusted.

REINVESTMENT PRIVILEGE

If Class A Shares in the Fund have been redeemed, the shareholder has the
privilege, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. Federated Securities
Corp. must be notified by the shareholder in writing or by his financial
institution of the reinvestment in order to eliminate a sales charge. If the
shareholder redeems his Class A Shares in the Fund, there may be tax
consequences.

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES

Investors may purchase Class A Shares at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an unaffiliated
investment company that were purchased or sold with a sales charge or commission
and were not distributed by Federated Securities Corp. The purchase must be made
within 60 days of the redemption, and Federated Securities Corp. must be
notified by the investor in writing, or by his financial institution, at the
time the purchase is made. From time to time, the Fund may offer dealers a
payment of .50% for Shares purchased under this program. If Shares are purchased
in this manner, Fund purchases will be subject to a contingent deferred sales
charge for one year from the date of purchase. Shareholders will be notified
prior to the implementation of any special offering as described above.

INVESTING IN CLASS B SHARES

Class B Shares are sold at their net asset value next determined after an order
is received. While Class B Shares are sold without an initial sales charge,
under certain circumstances described under "Contingent Deferred Sales Charge--
Class B Shares," a contingent deferred sales charge may be applied by the
distributor at the time Class B Shares are redeemed.

CONVERSION OF CLASS B SHARES

Class B Shares will automatically convert into Class A Shares on or around the
fifteenth of the month eight full years after the purchase date, except as noted
below, and may no longer be

subject to a distribution services fee (see "Distribution of Shares"). Such
conversion will be on the basis of the relative net asset values per share,
without the imposition of any sales charge, fee or other charge. Class B Shares
acquired by exchange from Class B Shares of another Federated Fund will convert
into Class A Shares based on the time of the initial purchase. For purposes of
conversion to Class A Shares, Shares purchased through the reinvestment of
dividends and distributions paid on Class B Shares will be considered to be held
in a separate sub-account. Each time any Class B Shares in the shareholder's
account (other than those in the sub-account) convert to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also
convert to Class A Shares. The conversion of Class B Shares to Class A Shares is
subject to the continuing availability of a ruling from the Internal Revenue
Service or an opinion of counsel that such conversions will not constitute
taxable events for federal tax purposes. There can be no assurance that such
ruling or opinion will be available, and the conversion of Class B Shares to
Class A Shares will not occur if such ruling or opinion is not available. In
such event, Class B Shares would continue to be subject to higher expenses than
Class A Shares for an indefinite period.

Orders for $250,000 or more of Class B Shares will automatically be invested in
Class A Shares.

INVESTING IN CLASS C SHARES

Class C Shares are sold at their net asset value next determined after an order
is received. A contingent deferred sales charge of 1.00% will be charged on
assets redeemed within the first full 12 months following purchase. For a
complete description of this charge, see "Contingent Deferred Sales
Charge--Class C Shares."

PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION

The financial institution which maintains investor accounts in Class B Shares or
Class C Shares with the Fund must do so on a fully disclosed basis unless it
accounts for share ownership periods used in calculating the contingent deferred
sales charge (see "Contingent Deferred Sales Charge"). In addition, advance
payments made to financial institutions may be subject to reclaim by the
distributor for accounts transferred to financial institutions which do not
maintain investor accounts on a fully disclosed basis and do not account for
share ownership periods.

PURCHASING SHARES BY WIRE

for purchases on which no sales charge is imposed must be received before 3:00
p.m. (Eastern time) on the next business day following the order. Federal funds
should be wired as follows: State Street Bank and Trust Company, Boston,
Massachusetts; Attn: EDGEWIRE; For Credit to: (Fund Name) (Fund Class); (Fund
Number); Account Number; Trade Date and Order Number; Group Number or Dealer
Number; Nominee or Institution Name; and ABA Number ▇▇▇▇▇▇▇▇▇. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM

RETIREMENT PLANS

Fund Shares can be purchased as an investment for retirement plans or ▇▇▇
accounts. For further details, contact the Fund and consult a tax adviser.

-------------------------------------------------------

EXCHANGE PRIVILEGE

CLASS A SHARES

CLASS B SHARES

Class B shareholders may exchange all or some of their Shares for Class B Shares
of other Federated Funds. (Not all Federated Funds currently offer Class B
Shares. Contact your financial institution regarding the availability of other
Class B Shares in the Federated Funds.) Exchanges are made at net asset value
without being assessed a contingent deferred sales charge on the exchanged
Shares. In determining the applicability of the contingent deferred sales
charge, the required holding period for your new Class B Shares received through
an exchange will include the period for which your original Class B Shares were
held. For more information, see "Contingent Deferred Sales Charge."

CLASS C SHARES

Class C shareholders may exchange all or some of their Shares for Class C Shares
in other Federated Funds at net asset value without a contingent deferred sales
charge. (Not all Federated Funds currently offer Class C Shares. Contact your
financial institution regarding the availability of other Class C Shares in the
Federated Funds.) In determining the applicability of the contingent deferred
sales charge, the required holding period for your new Class C Shares received
through an exchange will include the period for which your original Class C
Shares were held. For more information, see "Contingent Deferred Sales Charge."

REQUIREMENTS FOR EXCHANGE

TAX CONSEQUENCES

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a capital gain or loss may be
realized.

MAKING AN EXCHANGE

Instructions for exchanges for the Federated Funds may be given in writing or by
telephone. Written instructions may require a signature guar-

▇▇▇▇▇. Shareholders of the Fund may have difficulty in making exchanges by
telephone through brokers and other financial institutions during times of
drastic economic or market changes. If a shareholder cannot contact his broker
or financial institution by telephone, it is recommended that an exchange
request be made in writing and sent by overnight mail to Federated Shareholder
Services Company, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇--▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.

TELEPHONE INSTRUCTIONS

-------------------------------------------------------

HOW TO REDEEM SHARES

REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION

REDEEMING SHARES BY TELEPHONE

Shares may be redeemed in any amount by calling the Fund provided the Fund has a
properly

completed authorization form. These forms can be obtained from Federated
Securities Corp.

Proceeds will be mailed in the form of a check, to the shareholder's address of
record or by wire transfer to the shareholder's account at a domestic commercial
bank that is a member of the Federal Reserve System. The minimum amount for a
wire transfer is $1,000. Proceeds from redeemed Shares purchased by check or
through ACH will not be wired until that method of payment has cleared. Proceeds
from redemption requests received on holidays when wire transfers are restricted
will be wired the following business day. Questions about telephone redemptions
on days when wire transfers are restricted should be directed to your
shareholder services representative at the telephone number listed on your
account statement.

REDEEMING SHARES BY MAIL

SPECIAL REDEMPTION FEATURES

SYSTEMATIC WITHDRAWAL PROGRAM

Depending upon the amount of the withdrawal payments, the amount of dividends
paid and capital gains distributions with respect to Shares, and the fluctuation
of the net asset value of Shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the Fund. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. To be eligible to
participate in this program, a shareholder must have an account

value of at least $10,000, other than retirement accounts subject to required
minimum distributions. A shareholder may apply for participation in this program
through his financial institution. Due to the fact that Class A Shares are sold
with a sales charge, it is not advisable for shareholders to continue to
purchase Class A Shares while participating in this program. A contingent
deferred sales charge may be imposed on Class B Shares and Class C Shares.

CONTINGENT DEFERRED SALES CHARGE

Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:

CLASS A SHARES

CLASS B SHARES

Shareholders redeeming Class B Shares from their Fund accounts within six full
years of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption in accordance with the following schedule:

CONTINGENT
YEAR OF REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
---------------------- ------------

First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%

CLASS C SHARES

Shareholders redeeming Class C Shares from their Fund accounts within one full
year of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor of 1.00%. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.

CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES

ing the amount of the applicable contingent deferred sales charge, redemptions
are deemed to have occurred in the following order: (1) Shares acquired through
the reinvestment of dividends and long-term capital gains; (2) Shares held for
more than six full years from the date of purchase with respect to Class B
Shares and one full year from the date of purchase with respect to Class C
Shares and applicable Class A Shares; (3) Shares held for less than six years
with respect to Class B Shares and less than one full year from the date of
purchase with respect to Class C Shares and applicable Class A Shares on a
first-in, first-out basis. A contingent deferred sales charge is not assessed in
connection with an exchange of Fund Shares for shares of other Federated Funds
in the same class (see "Exchange Privilege"). Any contingent deferred sales
charge imposed at the time the exchanged-for Shares are redeemed is calculated
as if the shareholder had held the shares from the date on which he became a
shareholder of the exchanged-from Shares. Moreover, the contingent deferred
sales charge will be eliminated with respect to certain redemptions (see
"Elimination of Contingent Deferred Sales Charge").

ELIMINATION OF CONTINGENT

DEFERRED SALES CHARGE

The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986 of the last
surviving shareholder; (2) redemptions representing minimum required
distributions from an Individual Retirement Account or other retirement plan to
a shareholder who has attained the age of 70-1/2; (3) involuntary redemptions by
the Fund of Shares in shareholder accounts that do not comply with the minimum
balance requirements; and (4) qualifying redemptions of Class B Shares under a
Systematic Withdrawal Program. To qualify for elimination of the contingent
deferred sales charge through a Systematic Withdrawal Program, the redemptions
of Class B Shares must be from an account: that is at least 12 months old, has
all Fund distributions reinvested in Fund Shares, and has a value of at least
$10,000 when the Systematic Withdrawal Program is established. Qualifying
redemptions may not exceed 1.00% monthly of the account value as periodically
determined by the Fund. For more information regarding the elimination of the
contingent deferred sales charge through a Systematic Withdrawal Program contact
your financial intermediary or the Fund. No contingent deferred sales charge
will be imposed on redemptions of Shares held by Directors, employees and sales
representatives of the Fund, the distributor, or affiliates of the Fund or
distributor, and their immediate family members; employees of any financial
institution that sells Shares of the Fund pursuant to a sales agreement with the
distributor; and spouses and children under the age of 21 of the aforementioned
persons. Finally, no contingent deferred sales charge will be imposed on the
redemption of Shares originally purchased through a bank trust department, an
investment adviser registered under the Investment Advisers Act of 1940 or
retirement plans where the third party administrator has entered into certain
arrangements with Federated Securities Corp. or its affiliates, or any other
financial institution, to the extent that no payments were advanced for
purchases made through such entities. The Fund reserves the right to discontinue
or modify the elimination of the contingent deferred sales charge. Shareholders
will be notified of a discontinuation. Any Shares purchased prior to the
termination of such waiver would have the contingent deferred sales charge
eliminated as provided in the Fund's prospectus at the time of the purchase of
the Shares. If a shareholder making a redemption qualifies for an elimination of
the contingent deferred sales charge, the shareholder must notify Federated
Securities Corp. or the transfer agent in writing that the shareholder is
entitled to such elimination.

-------------------------------------------------------

ACCOUNT AND SHARE INFORMATION

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder. Share certificates are not issued unless
requested in writing to Federated Shareholder Services Company.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.

DIVIDENDS

CAPITAL GAINS

Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the Class A Share required
minimum value of $500 or the required minimum value of $1,500 for Class B Shares
and Class C Shares. This requirement does not apply, however, if the balance
falls below the required minimum value because of changes in the net asset value
of the respective Share Class. Before Shares are redeemed to close an account,
the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.

-------------------------------------------------------
CORPORATION INFORMATION

MANAGEMENT OF THE CORPORATION

BOARD OF DIRECTORS

INVESTMENT ADVISER

Investment decisions for the Fund are made by Federated Global Research Corp.,
the Fund's investment adviser, subject to direction by the Directors. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.

ADVISORY FEES

ADVISER'S BACKGROUND

▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has been the Fund's portfolio manager since its inception. ▇▇.
▇▇▇▇▇▇▇ joined

Federated Investors in 1995 as a Senior Vice President of the Fund's investment
adviser. ▇▇. ▇▇▇▇▇▇▇ served as Vice President/Portfolio Manager of international
equity portfolios at ▇▇▇▇▇▇ and S. Bleichroeder, Inc. from 1994 to 1995. He
served as an Assistant Vice President/Portfolio Manager for international
equities at the College Retirement Equities Fund from 1986 to 1994. ▇▇. ▇▇▇▇▇▇▇
is a Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pennsylvania.

DISTRIBUTION OF SHARES

The distributor may offer to pay financial institutions an amount equal to 1% of
the net asset value of Class C Shares purchased by their clients or customers at
the time of purchase. These payments will be made directly by the distributor
from its assets, and will not be made from assets of the Fund. Financial
institutions may elect to waive the initial payment described above; such waiver
will result in the waiver by the Fund of the otherwise applicable contingent
deferred sales charge.

The distributor will pay dealers an amount equal to 5.5% of the net asset value
of Class B Shares purchased by their clients or customers. These payments will
be made directly by the distributor from its assets, and will not be made from
the assets of the Fund. Dealers may voluntarily waive receipt of all or any
portion of these payments. The distributor may pay a portion of the distribution
fee discussed below to financial institutions that waive all or any portion of
the advance payments.

DISTRIBUTION PLAN AND SHAREHOLDER SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), the distributor may be paid a fee in an amount
computed at an annual rate of up to .25% for Class A Shares and up to .75% for
Class B Shares and Class C Shares of the average daily net assets of each class
of Shares to finance any activity which is principally intended to result

in the sale of Shares subject to the Distribution Plan. The Fund does not
currently make payments to the distributor or charge a fee under the
Distribution Plan for Class A Shares, and shareholders of Class A Shares will be
notified if the Fund intends to charge a fee under the Distribution Plan. For
Class A Shares and Class C Shares, the distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales services or distribution-related
support services as agents for their clients or customers. With respect to Class
B Shares, because distribution fees to be paid by the Fund to the distributor
may not exceed an annual rate of .75% of Class B Shares' average daily net
assets, it will take the distributor a number of years to recoup the expenses it
has incurred for its sales services and distribution-related support services
pursuant to the Distribution Plan.

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to .25% of the average daily net asset value of
Class A Shares, Class B Shares, and Class C Shares to obtain certain personal
services for shareholders and for the maintenance of shareholder accounts
("Shareholder Services"). Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform Shareholder Services directly or will
select financial institutions to perform Shareholder Services. Financial
institutions will receive fees based upon Shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS

Furthermore, with respect to Class A Shares, Class B Shares, and Class C Shares,
Federated Securities Corp. and Federated Shareholder Services may offer to pay a
fee from their own assets to financial institutions as financial assistance for
providing substantial marketing and sales support. The support may include
sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance will be predicated upon
the amount of Shares the financial institution sells or may sell, and/or upon
the

type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's Adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
------------------- --------------------------------

.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750
million

EXPENSES OF THE FUND AND CLASS A
SHARES, CLASS B SHARES, AND
CLASS C SHARES

Holders of Class A Shares, Class B Shares, and Class C Shares pay their
allocable portion of Corporation and portfolio expenses.

The Corporation expenses for which holders of Class A Shares, Class B Shares,
and Class C Shares pay their allocable portion include, but are not limited to:
the cost of organizing the Corporation and continuing its existence; registering
the Corporation with federal and state securities authorities; Directors' fees;
auditors' fees; the cost of meetings of Directors; legal fees of the
Corporation; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.

The portfolio expenses for which holders of Class A Shares, Class B Shares, and
Class C Shares pay their allocable portion include, but are not limited to:
registering the portfolio and Class A Shares, Class B Shares, and Class C Shares
of the portfolio; investment advisory services; taxes and commissions; custodian
fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise from time to time.
At present, the only expenses which are allocated specifically to Class A
Shares, Class B Shares, and Class C Shares as classes are expenses under the
Corporation's Distribution Plan and fees for Shareholder Services. However, the
Directors reserve the right to allocate certain other expenses to holders of
Class A Shares, Class B Shares and Class C Shares as they deem appropriate
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Class A Shares, Class B Shares, and Class C Shares;
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Class A Shares, Class B Shares, and
Class C Shares; legal fees relating solely to Class A Shares, Class B Shares, or
Class C Shares; and Directors' fees incurred as a result of issues related
solely to Class A Shares, Class B Shares, or Class C Shares.

BROKERAGE TRANSACTIONS

-------------------------------------------------------
SHAREHOLDER INFORMATION

VOTING RIGHTS

-------------------------------------------------------

TAX INFORMATION

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

-------------------------------------------------------

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for each class
of Shares.

Total return represents the change, over a specific period of time, in the value
of an investment in each class of Shares after reinvesting all income and
capital gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.

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

Total return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares. Expense differences among Class A Shares, Class B
Shares, and Class C Shares may affect the performance of each class.

From time to time, advertisements for Class A Shares, Class B Shares, and Class
C Shares of the Fund may refer to ratings, rankings, and other information in
certain financial publications and/ or compare the performance of Class A
Shares, Class B Shares, and Class C Shares to certain indices.

-------------------------------------------------------

APPENDIX

STANDARD AND POOR'S RATINGS
GROUP LONG TERM DEBT
RATING DEFINITIONS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's Ratings
Group. Capacity to pay interest and repay principal is extremely strong.

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

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

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

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

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

▇▇▇▇▇'▇ INVESTORS SERVICE, INC.
LONG TERM BOND RATING
DEFINITIONS

AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally

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

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

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

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

FITCH INVESTORS SERVICE, INC.
LONG-TERM DEBT RATING
DEFINITIONS

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

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

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

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

▇▇▇▇▇'▇ INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATINGS

-- Leading market positions in well established industries.

-- High rates of return on funds employed.

-- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

-- Broad margins in earning coverage of fixed financial charges and high
internal cash generation.

-- Well established access to a range of financial markets and assured sources
of alternate liquidity.

STANDARD AND POOR'S RATINGS
GROUP COMMERCIAL PAPER
RATINGS

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

FITCH INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATING
DEFINITIONS

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

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

------------------------------------------------------
------------------------------------------------------

ADDRESSES

FEDERATED LATIN AMERICAN GROWTH FUND
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

DISTRIBUTOR

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

INVESTMENT ADVISER

Federated Global Research Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

CUSTODIAN

State Street Bank and Trust Company
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT

Federated Shareholder Services Company
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

INDEPENDENT AUDITORS

Ernst & Young LLP
One Oxford Centre
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
FEDERATED LATIN AMERICAN
GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT
SERIES, INC.)
CLASS A SHARES, CLASS B SHARES,
CLASS C SHARES
PROSPECTUS

An Open-End, Diversified Management
Investment Company

January 31, 1997

LOGO
Cusip 981487 79 6
Cusip 981487 78 8
Cusip 981487 77 0

G01471-02 (1/97)

--------------------------------------------------------------------------------

FEDERATED LATIN AMERICAN GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus for Class A Shares, Class B Shares, and Class C Shares, or
the stand-alone prospectus for Class A Shares of Federated Latin
American Growth Fund (the "Fund") dated January 31, 1997. This
Statement is not a prospectus itself. You may request a copy of either
prospectus or a paper copy of this Statement of Additional Information,
if you have received it electronically, free of charge by calling 1-
▇▇▇-▇▇▇-▇▇▇▇.
Federated Investors Tower
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

Statement dated January 31, 1997
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip ▇▇▇▇▇▇▇▇▇
Cusip ▇▇▇▇▇▇▇▇▇
Cusip ▇▇▇▇▇▇▇▇▇
G01471-03 (1/97)

GENERAL INFORMATION ABOUT THE FUND 1

INVESTMENT OBJECTIVE AND POLICIES 1

Convertible Securities 1
Warrants 1
Sovereign Debt Obligations 1
When-Issued and Delayed Delivery
Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Futures and Options 3
Risks 6
Foreign Currency Transactions 8
Special Considerations Affecting Latin
America 10
Additional Risk Considerations 11
Portfolio Turnover 11
Investment Limitations 11
WORLD INVESTMENT SERIES, INC. MANAGEMENT 14

Fund Ownership 18
Directors Compensation 19
INVESTMENT ADVISORY SERVICES 19

Adviser to the Fund 19
Advisory Fees 20
Other Related Services 20

BROKERAGE TRANSACTIONS 20

OTHER SERVICES 20

Fund Administration 20
Custodian and Portfolio Accountant 20
Transfer Agent 21
Independent Auditors 21
PURCHASING SHARES 21

Distribution Plan and Shareholder Services
Agreement 21
Conversion to Federal Funds 21
Purchases by Sales Representatives,
Directors,
and Employees of the Fund 21
DETERMINING NET ASSET VALUE 22

Determining Market Value of Securities 22
Trading in Foreign Securities 22
REDEEMING SHARES 22

Redemption in Kind 23
Elimination of the Contingent Deferred
Sales Charge 23
TAX STATUS 23

The Fund's Tax Status 23
Foreign Taxes 23
Shareholders' Tax Status 24
TOTAL RETURN 24

YIELD 24

PERFORMANCE COMPARISONS 24

Economic and Market Information 26
ABOUT FEDERATED INVESTORS 26

Mutual Fund Market 27
Institutional Clients 27
Bank Marketing 27
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 27
FINANCIAL STATEMENTS 27

GENERAL INFORMATION ABOUT THE FUND

The Fund is a portfolio of World Investment Series, Inc. (the
`Corporation''), which was established as a corporation under the laws of
the state of Maryland on January 25, 1994.
Shares of the Fund are offered in three classes known as Class A Shares,
Class B Shares, and Class C Shares (individually and collectively referred
to as `Shares'' as the context may require). This Statement of Additional
Information relates to all three classes of the above-mentioned Shares.
INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to provide long-term growth of
capital. Any income realized from the portfolio is incidental. The Fund
pursues its investment objective by investing primarily in equity
securities of Latin American companies. The investment objective cannot be
changed without the approval of shareholders.
CONVERTIBLE SECURITIES
The convertible bonds and convertible preferred stocks in which the Fund
may invest generally retain the investment characteristics of fixed income
securities until they have been converted but also react to movements in
the underlying equity securities. The prices of fixed income securities
fluctuate inversely to the direction of interest rates. The holder is
entitled to receive the fixed income of a bond or the dividend preference
of a preferred stock until the holder elects to exercise the conversion
privilege. Usable bonds are corporate bonds that can be used in whole or
in part, customarily at full face value, in lieu of cash to purchase the
issuer's common stock.
Convertible securities are senior to equity securities, and therefore have
a claim to assets of the corporation prior to the holders of common stock

in the case of liquidation. However, convertible securities are generally
subordinated to similar nonconvertible securities of the same company. The
interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality. The
Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stocks when, in the
investment adviser's opinion, the investment characteristics of the
underlying common shares will assist the Fund in achieving it investment
objective. Otherwise, the Fund will hold or trade the convertible
securities.
WARRANTS
The Fund may invest in warrants. Warrants are options to purchase common
stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than a year to twenty years or
may be perpetual. However, most warrants have expiration dates after which
they are worthless. In addition, if the market price of the common stock
does not exceed the warrant's exercise price during the life of the
warrant, the warrant will expire as worthless. Warrants have no voting
rights, pay no dividends, and have no rights with respect to the assets of
the corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the optioned common stock.
SOVEREIGN DEBT OBLIGATIONS
The Fund may purchase sovereign debt instruments issued or guaranteed by
foreign governments or their agencies, including debt of countries with
emerging markets or developing countries. Sovereign debt may be in the

form of conventional securities or other types of debt instruments, such as
loans or loan participations. Sovereign debt of emerging market or
developing countries may involve a high degree of risk, and may be in
default or present the risk of default. Governmental entities responsible
for repayment of the debt may be unable or unwilling to repay principal and
interest when due, and may require renegotiation or rescheduling of debt
payments. In addition, prospects for repayment of principal and interest
may depend on political as well as economic factors. The Fund may also
invest in debt obligations of supranational entities, which include
international organizations designed or supported by governmental entities
to promote economic reconstruction or development, and international
banking institutions and related government agencies. Examples of these
include, but are not limited to, the International Bank for Reconstruction
and Development (World Bank), European Investment Bank and Inter-American
Development Bank.

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

LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker. The Fund does not
have the right to vote securities on loan, but would terminate the loan and
regain the right to vote if that were considered important with respect to
the investment.
There is the risk that when lending portfolio securities, the securities
may not be available to the Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable
price. In addition, in the event that a borrower of securities would file
for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily.
To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any
sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the
Fund might be delayed pending court action. The Fund believes that under
the regular procedures normally in effect for custody of the Fund's

portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are found by the Fund's investment adviser to be
creditworthy pursuant to guidelines established by the Corporation's Board
of Directors (the `Directors'').
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future, the Fund will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase agreements
may enable the Fund to avoid selling portfolio instruments at a time when a
sale may be deemed to be disadvantageous, but the ability to enter into
reverse repurchase agreements does not ensure that the Fund will be able to
avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Directors to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission (`SEC'') staff position set forth in the adopting release for

Rule 144A under the Securities Act of 1933, as amended (the `Rule''). The
Rule is a non-exclusive safe-harbor for certain secondary market
transactions involving securities subject to restrictions on resale under
federal securities laws. The Rule provides an exemption from registration
for resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule. The
Fund

believes that the staff of the SEC has left the question of determining the
liquidity of all restricted securities to the Directors. The Directors may
consider the following criteria in determining the liquidity of certain
restricted securities:
othe frequency of trades and quotes for the security;
othe number of dealers willing to purchase or sell the security and
the number of other potential buyers;
odealer undertakings to make a market in the security; and
othe nature of the security and the nature of the marketplace trades.
Notwithstanding the foregoing, securities of foreign issuers which are not
listed on a recognized domestic or foreign exchange or for which a bona
fide market does not exist at the time of purchase or subsequent
transaction shall be treated as illiquid securities by the Directors.
FUTURES AND OPTIONS
The Fund may attempt to hedge all or a portion of its portfolio or gain
relatively rapid, liquid, and cost-effective exposure to certain markets by
buying and selling futures contracts and options on futures contracts.

FUTURES CONTRACTS
The Fund may engage in futures contracts. A futures contract is a
firm commitment by two parties, the seller who agrees to make delivery
of the specific type of security called for in the contract ("going
short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. However, a securities
index futures contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last
trading day of the contract and the price at which the index was
originally written. No physical delivery of the underlying securities
in the index is made.
The purpose of the acquisition or sale of a futures contract by the
Fund is to protect the Fund from fluctuations in the value of its
securities caused by unanticipated changes in interest rates or market
conditions without necessarily buying or selling the securities. For
example, in the fixed income securities market, price generally moves
inversely to interest rates. A rise in rates generally means a drop
in price. Conversely, a drop in rates generally means a rise in
price. In order to hedge its holdings of fixed income securities
against a rise in market interest rates, the Fund could enter into
contracts to deliver securities at a predetermined price (i.e., `go
short') to protect itself against the possibility that the prices of
its fixed income securities may decline during the anticipated holding
period. The Fund would `go long'' (i.e., agree to purchase
securities in the future at a predetermined price) to hedge against a
decline in market interest rates. The Fund may also invest in
securities index futures contracts when the investment adviser

believes such investment is more efficient, liquid, or cost-effective
than investing directly in the securities underlying the index.
STOCK INDEX OPTIONS
The Fund may purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter market. A stock
index fluctuates with changes in the market values of the stocks
included in the index.
The effectiveness of purchasing stock index options will depend upon
the extent to which price movements in the Fund's portfolio correlate
with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether the Fund will
realize a gain or loss from the purchase of options on an index
depends upon movements in the level of stock prices in the stock
market generally or, in the case of certain indices, in an industry or
market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on stock
indices will be subject to the ability of the investment adviser to
predict correctly movements in the direction of the stock market
generally or of a particular industry.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed or over-the-counter put options on
financial futures contracts. The Fund would use these options only to
protect portfolio securities against decreases in value resulting from
market factors such as anticipated increase in interest rates, or when
the investment adviser believes such investment is more efficient,
liquid or cost-effective than investing directly in the futures

contract or the underlying securities or when such futures contracts
or securities are unavailable for investment upon favorable terms.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles
(but does not obligate) its purchaser to decide on or before a future
date whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an
event, the Fund will normally close out its option by selling an
identical option. If the hedge is successful, the proceeds received by
the Fund upon the sale of the second option will be large enough to
offset both the premium paid by the Fund for the original option plus
the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Fund would
then deliver the futures contract in return for payment of the strike
price. If the Fund neither closes out nor exercises an option, the
option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
The Fund may write listed or over-the counter put options on financial
futures contracts to hedge its portfolio or when the investment
adviser believes such investment is more efficient, liquid or cost-
effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are

unavailable for investment upon favorable terms. When the Fund writes
a put option on a futures contract, it receives a cash premium which
can be used in whatever way is deemed most advantageous to the Fund.
In exchange for such premium, the Fund grants to the purchaser of the
put the right to receive from the Fund, at the strike price, a short
position in such futures contract, even though the strike price upon
exercise of the option is greater than the value of the futures
position received by such holder. If the value of the underlying
futures position is not such that exercise of the option would be
profitable to the option holder, the option will generally expire
without being exercised. The Fund has no obligation to return
premiums paid to it whether or not the option is exercised. It will
generally be the policy of the Fund, in order to avoid the exercise of
an option sold by it, to cancel its obligation under the option by
entering into a closing purchase transaction, if available, unless it
is determined to be in the Fund's interest to deliver the underlying
futures position. A closing purchase transaction consists of the
purchase by the Fund of an option having the same term as the option
sold by the Fund, and has the effect of canceling the Fund's position
as a seller. The premium which the Fund will pay in executing a
closing purchase transaction may be higher than the premium received
when the option was sold, depending in large part upon the relative
price of the underlying futures position at the time of each
transaction.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options or over-the-counter call options on financial and
stock index futures contracts (including cash-settled stock index

options), to hedge its portfolio against an increase in market
interest rates, a decrease in stock prices, or when the investment
adviser believes such investment is more efficient, liquid or cost-
effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are
unavailable for investment upon favorable terms. When the Fund writes
a call option on a futures contract, it is undertaking the obligation
of assuming a short futures position (selling a futures contract) at
the fixed strike price at any time during the life of the option if
the option is exercised. As stock prices fall or market interest rates
rise and cause the price of futures to decrease, the Fund's obligation
under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position
to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the
call, so that the Fund keeps the premium received for the option. This
premium can substantially offset the drop in value of the Fund's
portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of
it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by the Fund for the
initial option. The net premium income of the Fund may then
substantially offset the realized decrease in value of the hedged
securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but

not the obligation, to enter into the underlying futures contract at a
strike price determined at the time the call was purchased, regardless
of the comparative market of such futures position at the time the
option is exercised. The holder of a call option has the right to
receive a long (or buyer's) position in the underlying futures
contract.
The Fund generally will not maintain open positions in futures
contracts it has sold or call options it has written on futures
contracts if, in the aggregate, the value of the open positions
(marked to market) exceeds the current market value of its securities
portfolio plus the unrealized loss or minus the unrealized gain on
those open positions, adjusted for the correlation between the hedged
securities and the futures contracts. If this limitation is exceeded
at any time, the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and
options positions within this limitation.
``MARGIN''IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of `initial margin'' in
cash or U.S. Treasury bills with its custodian (or the broker, if
legally permitted). The nature of initial margin in futures
transactions is different from that of margin in securities
transactions in that initial margin in futures transactions does not
involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon

termination of the futures contract, assuming all contractual
obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called `variation margin,'' equal to the
daily change in value of the futures contract. This process is known
as `marking to market.'' Variation margin does not represent a
borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the
Fund will ▇▇▇▇ to market its open futures positions.
The Fund is also required to deposit and maintain margin when it
writes call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities in its
portfolio. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a
specified price during the term of the option. A call option gives the
Fund, in return for a premium, the right to buy the underlying
securities from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may write covered put and call options to generate income and
thereby protect against price movements in particular securities in
the Fund's portfolio. As the writer of a call option, the Fund has the
obligation upon exercise of the option during the option period to
deliver the underlying security upon payment of the exercise price. As
the writer of a put option, the Fund has the obligation to purchase a

security from the purchaser of the option upon the exercise of the
option.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount
of any additional consideration). In the case of put options, the Fund
will segregate cash or U.S. Treasury obligations with a value equal to
or greater than the exercise price of the underlying securities.
OVER-THE-COUNTER OPTIONS
The Fund may purchase and write over-the-counter options (`OTC
options') on portfolio securities or in securities indexes in
negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund or when the
securities indexes are not traded on an exchange.
OTC options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded
options have a continuous liquid market while OTC options may not.

RISKS
OPTIONS
Certain hedging vehicles have risks associated with them including
possible default by the other party to the transaction, illiquidity
and, to the extent the adviser's view as to certain market movements
is incorrect, the risk that the use of such hedging strategies could
result in losses greater than if they had not been used. Use of put

and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation
the Fund can realize on its investments or cause the Fund to hold a
security it might otherwise sell. The use of currency transactions
can result in the Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified
currency. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between
price movements of futures contracts and price movements in the
related portfolio position of the Fund creates the possibility that
losses on the hedging instrument may be greater than gains in the
value of the Fund's position. In addition, futures and options
markets may both be liquid in all circumstances and certain over-the-
counter options may have not markets. As a result, in certain
markets, the Fund might not be able to close out a transaction without
incurring substantial losses, if at all. Although the use of futures
and options transactions for hedging should tend to minimize the risk
of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result
from an increase in value of such position. Finally, the daily
variation margin requirements for futures contracts would create a
greater ongoing potential financial risk than would purchase of
options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of hedging strategies would

reduce net asset value, and possibly income, and such losses can be
greater than if the hedging strategies had not been utilized.
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transaction (including forward currency contracts) and multiple
interest rate transactions and any combination of futures, options,
currency and interest rate transactions (`component" transactions),
instead of a single hedging strategy, as part of a single or combined
strategy when, in the opinion of the investment adviser, it is in the
best interests of the Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its
component transactions. Although combined transactions are normally
entered into based on the investment adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively
achieve the desired portfolio management goal, it is possible that the
combination will instead increase such risks or hinder achievement of
the portfolio management objective.
SWAPS, CAPS, FLOORS AND COLLARS
Among the hedging strategies into which the Fund may enter are
interest rate, currency and index swaps and the purchase or sale of
related caps, floors, and collars. The Fund expects to enter into
these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against
currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund intends to use these
transactions as ▇▇▇▇▇▇ and not as speculative investments and will not

sell interest rate caps or floors where it does not own securities or
other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or
receive interest, e.g., an exchange of floating rating payments of
fixed rate payments with respect to a notional amount of principal. A
currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash
flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to
receive payments on a notional principal amount from the party selling
such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the
party selling such floor to the extent that specified index falls
below a predetermined interest rate or amount. A collar is a
combination of a cap and a floor that preserves a certain return
within a predetermined range of interest rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the
two payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments.
Inasmuch as these swaps, caps, floors, and collars are entered into
for good faith hedging purposes, the investment adviser and the Fund
believe such obligations do not constitute senior securities under the
Investment Company Act of 1940 and, accordingly, will not treat them
as being subject to its borrowing restrictions. There is no minimal
acceptable rating for a swap, cap, floor, or collar to be purchased or

held in the Fund's portfolio. If there is a default by the
counterparty, the Fund may have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and
investment banking firms acting both as principals and agents
utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are
more recent innovations for which standardized documentation has not
yet been fully developed and, accordingly, they are less liquid than
swaps.
RISKS OF HEDGING STRATEGIES OUTSIDE THE U.S.
When conducted outside the U.S., hedging strategies may not be
regulated as rigorously as in the U.S., may not involve a clearing
mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such
positions also could be adversely affected by: (i) other complex
foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the
U.S., (iv) the imposition of different exercise and settlement terms
and procedures and the margin requirements than in the U.S., and (v)
lower trading volume and liquidity.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many hedging strategies, in addition to other requirements, require
that the Fund segregate liquid high grade assets with its custodian to
the extent Fund obligations are not otherwise "covered" through

ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the
Fund to pay or deliver securities or assets must be covered at all
times by the securities, instruments or currency required to be
delivered, or, subject to any regulatory restrictions, an amount of
cash or liquid high grade securities at least equal to the current
amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to
segregate them. For example, a call option written by the Fund will
require the Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate liquid high grade securities sufficient
to purchase and deliver the securities if the call is exercised. A
call option sold by the Fund on an index will require the Fund to own
portfolio securities which correlate with the index or to segregate
liquid high grade assets equal to the excess of the index value over
the exercise price on a current basis. A put option written by the
Fund requires the Fund to segregate liquid high grade assets equal to
the exercise price.
Except when the Fund enters into a forward contract for the purchase
or sale of a security denominated in a particular currency, a currency
contract which obligates the Fund to buy or sell currency will
generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's
obligations or to segregate liquid high grade assets equal to the
amount of the Fund's obligations.

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OTC issued and exchange
listed index options, will generally provide for cash settlement. As
a result, when the Fund sells these instruments it will only segregate
an amount of assets equal to its accrued net obligations, as there is
no requirement for payment or delivery of amounts in excess of the net
amount. These amounts will equal 100% of the exercise price in the
case of a non cash-settled put, the same as an OCC guaranteed listed
option sold by the Fund, or the in-the-money amount plus any sell-back
formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when
the in-the-money amount exceeds the exercise price, the Fund will
segregate, until the option expires or is closed out, cash or cash
equivalents equal in value to such excess. OTC issued and exchange
listed options sold by the Fund other than those above generally
settle with physical delivery, and the Fund will segregate an equal
amount of assets equal to the full value of the option. OTC options
settling with physical delivery, or with an election of either
physical delivery or cash settlement will be treated the same as other
options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possibly daily variation margin in addition
to segregating assets sufficient to meet its obligation to purchase or
provide securities or currencies, or to pay the amount owed at the
expiration of an index-based futures contract. Such assets may
consist of cash, cash equivalents, liquid debt or equity securities or
other acceptable assets.

With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect
to each swap on a daily basis and will segregate an amount of cash or
liquid high grade securities having a value equal to the accrued
excess. Caps, floors and collars require segregation of assets with a
value equal to the Fund's net obligation, if any.
Strategic transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into
offsetting transactions so that its combined position, coupled with
any segregated assets, equals its net outstanding obligation in
related options and hedging strategies. For example, the Fund could
purchase a put option if the strike price of that option is the same
or higher than the strike price of a put option sold by the Fund.
Moreover, instead of segregating assets if the Fund held a futures or
forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the
price of the contract held. Other hedging strategies may also be
offset in combinations. If the offsetting transaction terminates at
the time of or after the primary transaction no segregation is
required, but if it terminates prior to such time, assets equal to any
remaining obligation would need to be segregated.
The Fund's activities involving hedging strategies may be limited by
the requirements of Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code") for qualification as a regulated investment
company. (See "Tax Status")

FOREIGN CURRENCY TRANSACTIONS
CURRENCY RISKS
The exchange rates between the U.S. dollar and foreign currencies are
a function of such factors as supply and demand in the currency
exchange markets, international balances of payments, governmental
intervention, speculation and other economic and political conditions.
Although the Fund values its assets daily in U.S. dollars, the Fund
may not convert its holdings of foreign currencies to U.S. dollars
daily. The Fund may incur conversion costs when it converts its
holdings to another currency. Foreign exchange dealers may realize a
profit on the difference between the price at which the Fund buys and
sells currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its portfolio investments. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange
market or through forward contracts to purchase or sell foreign
currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
order to protect against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and a foreign
currency involved in an underlying transaction. However, forward
foreign currency exchange contracts may limit potential gains which
could result from a positive change in such currency relationships.
The investment adviser believes that it is important to have the
flexibility to enter into forward foreign currency exchange contracts

whenever it determines that it is in the Fund's best interest to do
so. The Fund will not speculate in foreign currency exchange.
The Fund will not enter into forward foreign currency exchange
contracts or maintain a net exposure in such contracts when it would
be obligated to deliver an amount of foreign currency in excess of the
value of its portfolio securities or other assets denominated in that
currency or, in the case of a "cross-hedge" denominated in a currency
or currencies that the investment adviser believes will tend to be
closely correlated with that currency with regard to price movements.
Generally, the Fund will not enter into a forward foreign currency
exchange contract with a term longer than one year.
FOREIGN CURRENCY OPTIONS
A foreign currency option provides the option buyer with the right to
buy or sell a stated amount of foreign currency at the exercise price
on a specified date or during the option period. The owner of a call
option has the right, but not the obligation, to buy the currency.
Conversely, the owner of a put option has the right, but not the
obligation, to sell the currency.
When the option is exercised, the seller (i.e., writer) of the option
is obligated to fulfill the terms of the sold option. However, either
the seller or the buyer may, in the secondary market, close its
position during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally rises in value if the underlying currency
depreciates in value. Although purchasing a foreign currency option
can protect the Fund against an adverse movement in the value of a
foreign currency, the option will not limit the movement in the value

of such currency. For example, if the Fund was holding securities
denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the
value of the currency, the Fund would not have to exercise its put
option. Likewise, if the Fund were to enter into a contract to
purchase a security denominated in foreign currency and, in
conjunction with that purchase, were to purchase a foreign currency
call option to hedge against a rise in value of the currency, and if
the value of the currency instead depreciated between the date of
purchase and the settlement date, the Fund would not have to exercise
its call. Instead, the Fund could acquire in the spot market the
amount of foreign currency needed for settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain
risks associated with foreign currency options. The markets in foreign
currency options are relatively new, and the Fund's ability to
establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not
purchase or write such options unless and until, in the opinion of the
investment adviser, the market for them has developed sufficiently to
ensure that the risks in connection with such options are not greater
than the risks in connection with the underlying currency, there can
be no assurance that a liquid secondary market will exist for a
particular option at any specific time.
In addition, options on foreign currencies are affected by all of
those factors that influence foreign exchange rates and investments
generally.

The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the
price of the option position may vary with changes in the value of
either or both currencies and may have no relationship to the
investment merits of a foreign security. Because foreign currency
transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign
currency options, investors may be disadvantaged by having to deal in
an odd lot market (generally consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of
very large transactions in the interbank market and thus may not
reflect relatively smaller transactions (i.e., less than $1 million)
where rates may be less favorable. The interbank market in foreign
currencies is a global, around-the-clock market. To the extent that
the U.S. option markets are closed while the markets for the
underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets until they reopen.
FOREIGN CURRENCY FUTURES TRANSACTIONS
By using foreign currency futures contracts and options on such
contracts, the Fund may be able to achieve many of the same objectives
as it would through the use of forward foreign currency exchange
contracts. The Fund may be able to achieve these objectives possibly

more effectively and at a lower cost by using futures transactions
instead of forward foreign currency exchange contracts.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS
Buyers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the use of futures generally. In
addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those
associated with options on currencies, as described above.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures
contracts is relatively new. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid
secondary market. To reduce this risk, the Fund will not purchase or
write options on foreign currency futures contracts unless and until,
in the opinion of the investment adviser, the market for such options
has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with transactions
in the underlying foreign currency futures contracts. Compared to the
purchase or sale of foreign currency futures contracts, the purchase
of call or put options on futures contracts involves less potential
risk to the Fund because the maximum amount at risk is the premium
paid for the option (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on a futures
contract would result in a loss, such as when there is no movement in
the price of the underlying currency or futures contract.

SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICA
Investing in securities of Latin American issuers may entail risks relating
to the potential political and economic instability of certain Latin
American countries and the risks of expropriation, nationalization,
confiscation or the imposition of restrictions on foreign investment and on
repatriation of capital invested. In the event of expropriation,
nationalization or other confiscation by any country, the Fund could lose
its entire investment in any such country.
The securities markets of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major
securities markets in the U.S. Disclosure and regulatory standards are in
many respects less stringent than U.S. standards. Furthermore, there is a
lower level of monitoring and regulation of the markets and the activities
of investors in such markets.
The limited size of many Latin American securities markets and limited
trading volume in the securities of Latin American issuers compared to
volume of trading in the securities of U.S. issuers could cause prices to
be erratic for reasons apart from factors that affect the soundness and
competitiveness of the securities issuers. For example, limited market
size may cause prices to be unduly influenced by traders who control large
positions. Adverse publicity and investors' perceptions, whether or not
based on in-depth fundamental analysis, may decrease the value and
liquidity of portfolio securities.
The Fund invests in securities denominated in currencies of Latin American
countries. Accordingly, changes in the value of these currencies against
the U.S. dollar will result in corresponding changes in the U.S. dollar
value of the Fund's assets denominated in those currencies.

Some Latin American countries also may have managed currencies, which are
not free floating against the U.S. dollar. In addition, there is risk that
certain Latin American countries may restrict the free conversion of their
currencies into other currencies. Further, certain Latin American
currencies may not be internationally traded. Certain of these currencies
have experienced a steep devaluation relative to the U.S. dollar. Any
devaluations in the currencies in which the Fund's portfolio securities are
denominated may have a detrimental impact on the Fund's net asset value.
The economies of individual Latin American countries may differ favorably
or unfavorably from the U.S. economy in such respects as the rate of growth
of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Certain Latin
American countries have experienced high levels of inflation which can have
a debilitating effect on an economy. Furthermore, certain Latin American
countries may impose withholding taxes on dividends payable to the Fund at
a higher rate than those imposed by other foreign countries. This may
reduce the Fund's investment income available for distribution to
shareholders.
Certain Latin American countries such as Argentina, Brazil and Mexico are
among the world's largest debtors to commercial banks and foreign
governments. At times, certain Latin American countries have declared
moratoria on the payment of principal and/or interest on outstanding debt.
Investment in sovereign debt can involve a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not
be able or willing to repay the principal and/or interest when due in
accordance with the terms of such debt. A governmental entity's
willingness or ability to repay principal and interest due in a timely
manner may be affected by, among other factors, its cash flow situation,

the extent of its foreign reserves, the availability of sufficient foreign
exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the governmental entity's policy
towards the International Monetary Fund, and the political constraints to
which a governmental entity may be subject. Governmental entities may also
be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure
to implement such reforms, achieve such levels of economic performance or
repay principal or interest when due may result in the cancellation of such
third parties' commitments to lend funds to the governmental entity, which
may further impair such debtor's ability or willingness to service its
debts in a timely manner. Consequently, governmental entities may default
on their sovereign debt.
Holders of sovereign debt, including the Fund, may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which
defaulted sovereign debt may be collected in whole or in part.
Economic growth was strong in the 1960's and 1970's, but slowed
dramatically (and in some instances was negative) in the 1980's as a result
of poor economic policies, higher international interest rates, and the
denial of access to new foreign capital. Although a number of Latin
American countries are currently experiencing lower rates of inflation and
higher rates of real growth in gross domestic product than they have in the
past, other Latin American countries continue to experience significant

problems, including high inflation rates and high interest rates. Capital
flight has proven a persistent problem and external debt has been forcibly
rescheduled. Political turmoil, high inflation, capital repatriation
restrictions, and nationalization have further exacerbated conditions.
Governments of many Latin American countries have exercised and continue to
exercise substantial influence over many aspects of the private sector
through the ownership or control of many companies, including some of the
largest in those countries. As a result, government actions in the future
could have a significant effect on economic conditions which may adversely
affect prices of certain portfolio securities. Expropriation, confiscatory
taxation, nationalization, political, economic or social instability or
other similar developments, such as military coups, have occurred in the
past and could also adversely affect the Fund's investments in this region.
Changes in political leadership, the implementation of market oriented
economic policies, such as the North American Free Trade Agreement
(`NAFTA''), privatization, trade reform and fiscal and monetary reform are
among the recent steps taken to renew economic growth. External debt is
being restructured and flight capital (domestic capital that has left home
country) has begun to return. Inflation control efforts have also been
implemented. Latin American equity markets can be extremely volatile and
in the past have shown little correlation with the U.S. market. Currencies
are typically weak, but most are now relatively free floating, and it is
not unusual for the currencies to undergo wide fluctuations in value over
short periods of time due to changes in the market.
ADDITIONAL RISK CONSIDERATIONS
The Directors consider at least annually the likelihood of the imposition
by any foreign government of exchange control restrictions which would
affect the liquidity of the Fund's assets maintained with custodians in

foreign countries, as well as the degree of risk from political acts of
foreign governments to which such assets may be exposed. The Directors
also consider the degree of risk involved through the holding of portfolio
securities in domestic and foreign securities depositories. However, in
the absence of willful misfeasance, bad faith or gross negligence on the
part of the investment adviser, any losses resulting from the holding of
the Fund's portfolio securities in foreign countries and/or with securities
depositories will be at the risk of shareholders. No assurance can be
given that the Directors' appraisal of the risks will always be correct or
that such exchange control restrictions or political acts of foreign
governments might not occur.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the
investment adviser believes it is appropriate to do so in light of the
Fund's investment objective, without regard to the length of time a
particular security may have been held. The investment adviser does not
anticipate that portfolio turnover will result in adverse tax consequences.
It is not anticipated that the portfolio trading engaged in by the Fund
will result in its annual rate of portfolio turnover exceeding 100%;
however, the relative performance of the Fund's investments may make a
realignment of the Fund's portfolio desirable from time to time. The
frequency of such portfolio realignments will be determined by market
conditions. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly. For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996, the Fund's portfolio turnover rate was
38%.

INVESTMENT LIMITATIONS
The following investment limitations are fundamental (except that no
investment limitation of the Fund shall prevent the Fund from investing
substantially all of its assets (except for assets which are not considered
`investment securities'' under the Investment Company Act of 1940 or
assets exempted by the SEC) in an open-end investment company with
substantially the same investment objectives):
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as are necessary for
the clearance of purchases and sales of portfolio securities. The
deposit or payment by the Fund of initial or variation margin in
connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets, including
the amount borrowed, and except to the extent that the Fund may enter
into futures contracts. The Fund will not borrow money or engage in
reverse repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while any borrowings in excess of 5% of its total assets
are outstanding.

PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In these cases, the Fund may pledge
assets as necessary to secure such borrowings. For purposes of this
limitation, the following will not be deemed to be pledges of the
Fund's assets: (a) the deposit of assets in escrow in connection with
the writing of covered put or call options and the purchase of
securities on a when-issued basis; and (b) collateral arrangements
with respect to: (i) the purchase and sale of securities options (and
options on securities indexes) and (ii) initial or variation margin
for futures contracts.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets
in any one industry, except that the Fund may invest 25% or more of
the value of its total assets in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities.
INVESTING IN COMMODITIES
The Fund will not invest in commodities, except that the Fund reserves
the right to engage in transactions involving futures contracts,
options, and forward contracts with respect to securities, securities
indexes or currencies.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the securities of
companies whose business involves the purchase or sale of real estate
or in securities which are secured by real estate or interests in real
estate.

LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities.
This shall not prevent the Fund from purchasing or holding U.S.
government obligations, corporate bonds, money market instruments,
debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by the Fund's investment objective,
policies, and limitations or the Corporation's Articles of
Incorporation.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items, or securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result, more
than 5% of the value of its total assets would be invested in the
securities of that issuer, and will not acquire more than 10% of the
outstanding voting securities of any one issuer.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval (except that no investment
limitation of the Fund shall prevent the Fund from investing substantially
all of its assets (except for assets which are not considered `investment
securities''under the Investment Company Act of 1940 or assets exempted by

the SEC) in an open-end investment company with substantially the same
investment objectives). Shareholders will be notified before any material
changes in these limitations become effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, and will invest no more than 10% of its total
assets in investment companies in general. The Fund will purchase
securities of investment companies only in open-market transactions
involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a
merger, consolidation, or acquisition of assets. It should be noted
that investment companies incur certain expenses such as management
fees, and, therefore, any investment by the Fund in shares of another
investment company would be subject to such duplicate expenses.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable time
deposits with maturities over seven days, over-the-counter options,
swap agreements not determined to be liquid, and certain restricted
securities not determined by the Directors to be liquid.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.

INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities or futures
contracts, unless the securities or futures contracts are held in the
Fund's portfolio or unless the Fund is entitled to them in deliverable
form without further payment or after segregating cash in the amount
of any further payment.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the
securities or futures contracts are held in the Fund's portfolio or
unless the Fund is entitled to them in deliverable form without
further payment or after segregating cash in the amount of any further
payment.
Except with respect to borrowing money, if a percentage limitation
is adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
The Fund has no present intent to borrow money, pledge securities, or
invest in reverse repurchase agreements in excess of 5% of the value of its
total assets in the coming fiscal year. In addition, the Fund expects to
lend not more than 5% of its total assets in the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be `cash items.''

WORLD INVESTMENT SERIES, INC. MANAGEMENT

Officers and Directors are listed with their addresses, birthdates, present
positions with World Investment Series, Inc., and principal occupations.

▇▇▇▇ ▇. ▇▇▇▇▇▇▇@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Director and Chairman
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. ▇▇. ▇▇▇▇▇▇▇ is the father of J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Executive Vice
President of the Company .

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: February 3, 1934
Director
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee,
University of Pittsburgh; Director or Trustee of the Funds.

▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇/IPC Commercial Department
▇▇▇▇ ▇. ▇▇▇▇ and Associates, Inc., Realtors
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, ▇▇▇▇
▇. ▇▇▇▇ and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.;
Director, ▇▇▇▇ Homes, Inc.; Director or Trustee of the Funds.

▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇

▇▇▇▇▇▇▇, ▇▇
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.*
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: October 11, 1932
Director
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Director and President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.@

Miller, Ament, Henny & Kochuba
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: June 18, 1924
Director
Attorney of Counsel, Miller, Ament, Henny & ▇▇▇▇▇▇▇; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

▇▇▇▇▇ ▇. ▇▇▇▇▇▇
One Royal Palm Way
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇
Birthdate: March 16, 1942
Director
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street
Boston Corporation; Director or Trustee of the Funds.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Miller, Ament, Henny & Kochuba
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: October 6, 1926
Director

Attorney, Member of Miller, Ament, Henny & ▇▇▇▇▇▇▇; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.

▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇.▇., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ and ▇▇▇▇▇; Director or Trustee of the Funds.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, Federal Emergency Management Advisory Board and Czech
Management Center; Director or Trustee of the Funds.

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇

▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: June 21, 1935
Director
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, ▇▇▇▇▇ Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director or
Trustee of the Funds.

J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. ▇▇. ▇▇▇▇▇▇▇ is the son of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Director and
Chairman of the Company.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Federated Investors Tower

Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.

▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds; Treasurer of some of the Funds.

* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board between meetings of
the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 ▇▇▇▇▇▇▇▇ Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; ▇▇▇▇▇▇▇▇▇ Funds; ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years;
Federated U.S. Government Securities Fund: 5-10 Years; Federated Utility
Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.; High Yield
Cash Trust; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash

Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds;
The Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
As of December 31, 1996, Officers and Directors of the Fund, as a group,
owned 9,137 (2.30%) of the Fund's outstanding shares..
As of December 31, 1996, the following shareholders of record owned 5% or
more of the outstanding voting stock of the Fund's Class A Shares: Careco,
Sunflower Bank, Salina, Kansas, owned approximately 22,675 shares (5.72%);
Ibak & Co., Iowa State Bank & Trust Co, Iowa City, Iowa, owned
approximately 70,564 shares (17.79%); Mersyr Co, Syracuse, New York, owned
approximately 32,436 shares (8.18%); and First National Bank of Decatur,
Decatur, Illinois, owned approximately 37,591 shares (9.48%).
As of December 31, 1996, no shareholders of record owned 5% or more of the
outstanding voting stock of the Fund's Class B Shares.
As of December 31, 1996, the following shareholders of record owned 5% or
more of the outstanding voting stock of the Fund's Class C Shares: ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, Jacksonville, Florida, for the sole benefit of
its customers, owned approximately 1,722 shares (9.15%); Resources Trust
Co. A/C ▇▇▇▇▇▇ ▇▇▇▇▇ ORP, Denver, Colorado, owned approximately 1,172
shares (6.24%); State Street Bank and Trust Co., Custodian for the ▇▇▇ of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, El Paso, Texas, owned approximately 1,369 shares (7.28%);
Resources Trust Co. A/C ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ORP, Denver, Colorado, owned

approximately 2,241 shares (11.91%); ▇▇▇▇▇▇ ▇▇▇▇▇ et. al. Trustees, New
Orleans, Louisiana, owned approximately 1,037 shares (5.52%); ▇▇▇▇▇▇▇▇ &
Co. Securities Inc., Custodian for the benefit of ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
Rollover, Bloomfield Hills, Michigan, owned approximately 2,242 shares
(11.92%); and NFSC for the exclusive benefit of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, Harveys Lake, Pennsylvania, owned approximately 1,858 shares
(9.88%).

DIRECTORS COMPENSATION

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

▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $0 $0 for the Corporation and
Chairman and Director 56 investment companies
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $1,018 $108,725 for the Corporation and
Director 56 investment companies
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. $1,120 $119,615 for the Corporation and
Director 56 investment companies
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $1,120 $119,615 for the Corporation and
Director 56 investment companies
▇▇▇▇▇ ▇. ▇▇▇▇ $1,120 $119,615 for the Corporation and
Director 56 investment companies
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D. $1,018 $108,725 for the
Corporation and

Director 56 investment companies
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $0 $0 for the Corporation and
President and Director 6 investment companies
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. $1,120 $119,615 for the
Corporation and
Director 56 investment companies
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $1,018 $108,725 for the Corporation and
Director 56 investment companies
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $1,018 $108,725 for the Corporation and
Director 56 investment companies
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. $1,018 $108,725 for the Corporation and
Director 56 investment companies
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $1,018 $108,725 for the Corporation and
Director 56 investment companies
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $1,018 $108,725 for the Corporation and
Director 56 investment companies

*Information is furnished for the fiscal year ended November 30, 1996.
#The aggregate compensation is provided for the Corporation, which is
comprised of 7 portfolios.
+The information is provided for the last calendar year end.
INVESTMENT ADVISORY SERVICES

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

The Adviser shall not be liable to the Corporation, the Fund, or any
shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or omitted
by it, except acts or omissions involving willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties imposed upon it by
its contract with the Corporation.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in each prospectus. For the period from February
28, 1996 (date of initial public investment) to November 30, 1996, the
Adviser earned $54,798, of which $52,073 was voluntarily waived.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order to
facilitate the purchase of shares of funds offered by Federated Securities
Corp.
BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the Fund or
to the Adviser and may include: advice as to the advisability of investing
in securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the Adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for which
the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The Adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research

services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. For the period
from February 28, 1996 (date of initial public investment) to November 30,
1996, the Fund paid $26,393 in brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
The Adviser may engage in other non-U.S. transactions that may have adverse
effects on the market for securities in the Fund's portfolio. The Adviser
is not obligated to obtain any material non-public (`inside'') information
about any securities issuer, or to base purchase or sale recommendations on
such information.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in each prospectus. From January 31, 1996 to March 1, 1996,
Federated Administrative Services, also a subsidiary of Federated
Investors, served as the Fund's Administrator. For purposes of this

Statement of Additional Information, Federated Services Company and
Federated Administrative Services may hereinafter collectively be referred
to as the `Administrators.'' For the period from February 28, 1996 (date
of initial public investment) to November 30, 1996, the Administrators
earned $140,012.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund
are held by foreign banks participating in a network coordinated by State
Street Bank. Federated Services Company, Pittsburgh, PA, provides certain
accounting and recordkeeping services with respect to the Fund's portfolio
investments. The fee paid for this service is based upon the level of the
Fund's average net assets for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based upon
the size, type, and number of accounts and transactions made by
shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
PURCHASING SHARES

Except under certain circumstances described in each prospectus, Shares are
sold at their net asset value (plus a sales charge on Class A Shares only)
on days the New York Stock Exchange is open for business. The procedure for
purchasing Shares is explained in each prospectus under "How To Purchase
Shares."

DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services as appropriate, to
stimulate distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to, marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Directors expect that the Class A
Shares, Class B Shares, and Class C Shares of the Fund will be able to
achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objectives. By identifying
potential investors whose needs are served by the Fund's objectives, and
properly servicing these accounts, it may be possible to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; (3)
enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996, the Fund's Class B Shares and Class C

Shares paid $3,120 and $889, respectively, in distribution services fees,
none of which was waived. Class A Shares have no present intention of
paying or accruing distribution services fees during the fiscal year ending
November 30, 1997. In addition, for the period from February 28, 1996 (date
of initial public investment) to November 30, 1996, the Fund's Class A
Shares, Class B Shares and Class C Shares paid shareholder services fees in
the amounts of $9,623, $1,040 and $296, respectively, none of which was
waived.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds before shareholders
begin to earn dividends. Federated Shareholder Services Company acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
PURCHASES BY SALES REPRESENTATIVES, DIRECTORS, AND EMPLOYEES OF THE FUND
Directors, employees, and sales representatives of the Fund, Federated
Global Research Corp., and Federated Securities Corp. or their affiliates,
or any investment dealer who has a sales agreement with Federated
Securities Corp. and their spouses and children under 21, may buy Class A
Shares at net asset value without a sales charge. Shares may also be sold
without a sales charge to trusts or pension or profit-sharing plans for
these people.
These sales are made with the purchaser's written assurance that the
purchase is for investment purposes and that the securities will not be
resold except through redemption by the Fund.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in each prospectus.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Fund is informed of the ex-dividend
date.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities, other than options, are
determined as follows:
ofor equity securities, according to the last sale price in the
market in which they are primarily traded (either a national
securities exchange or the over-the-counter market), if available;
oin the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
ofor bonds and other fixed income securities, as determined by an
independent pricing service;
ofor short-term obligations, according to the prices as furnished by
an independent pricing service, except that short-term obligations
with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost; and
ofor all other securities, at fair value as determined in good faith
by the Directors.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may consider:
institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data.

The Fund will value futures contracts and options at their market values
established by the exchanges on which they are traded at the close of
trading on such exchanges unless the Directors determine in good faith that
another method of valuing such investments is necessary.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value,
the Fund values foreign securities at the latest closing price on the
exchange on which they are traded immediately prior to the closing of the
New York Stock Exchange. Certain foreign currency exchange rates may also
be determined at the latest rate prior to the closing of the New York Stock
Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at current rates. Occasionally, events that affect these
values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If such events
materially affect the value of portfolio securities, these securities may
be valued at their fair value as determined in good faith by the Directors,
although the actual calculation may be done by others.
REDEEMING SHARES

deferred sales charge is based upon the amount of the administrative fee
paid at the time of purchase by the distributor to the financial
institution for services rendered, and the length of time the investor
remains a shareholder in the Fund. Should financial institutions elect to
receive an amount less than the administrative fee that is stated in the
prospectus for servicing a particular shareholder, the contingent deferred
sales charge and/or holding period for that particular shareholder will be
reduced accordingly.
Since portfolio securities of the Fund may be traded on foreign exchanges
which trade on Saturdays or on holidays on which the Fund will not make
redemptions, the net asset value of each class of Shares of the Fund may be
significantly affected on days when shareholders do not have an opportunity
to redeem their Shares.
REDEMPTION IN KIND
Although the Corporation intends to redeem Shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole or
in part by a distribution of securities from the respective Fund's
portfolio. To the extent available, such securities will be readily
marketable.
The Corporation has elected to be governed by Rule 18f-1 of the
Investment Company Act of 1940 under which the Corporation is obligated to
redeem Shares for any one shareholder in cash only up to the lesser of
$250,000 or 1% of the respective class's net asset value during any 90-day
period.
Any redemption beyond this amount will also be in cash unless the Directors
determine that payment should be in kind. In such a case, the Fund will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way as the Fund determines net asset value.

The portfolio instruments will be selected in a manner that the Directors
deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amounts that a shareholder may withdraw under a Systematic Withdrawal
Program that qualify for elimination of the Contingent Deferred Sales
Charge may not exceed 12% annually with reference initially to the value of
the Class B Shares upon establishment of the Systematic Withdrawal Program
and then as calculated at the fiscal year end. Redemptions on a qualifying
Systematic Withdrawal Program can be made at a rate of 1.00% monthly, 3.00%
quarterly, or 6.00% semi-annually with reference to the applicable account
valuation amount. Amounts that exceed the 12.00% annual limit for
redemption, as described, may be subject to the Contingent Deferred Sales
Charge. In determining the applicability of the Contingent Deferred Sales
Charge, the 12 month holding requirement for your new Class B Shares
received through an exchange will include the period for which your
original Class B Shares were held. However, for purposes of meeting the
$10,000 minimum account value requirement, Class B Share accounts values
will not be aggregated.
TAX STATUS

special tax treatment afforded to such companies. To qualify for this
treatment, the Fund must, among other requirements:
oderive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
oderive less than 30% of its gross income from the sale of securities
held less than three months;
oinvest in securities within certain statutory limits; and
odistribute to its shareholders at least 90% of its net income earned
during the year.
However, the Fund may invest in the stock of certain foreign corporations
which would constitute a Passive Foreign Investment Company (`PFIC'').
Federal income taxes may be imposed on the Fund upon disposition of PFIC
investments.
FOREIGN TAXES
Investment income on certain foreign securities in which the Fund may
invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United
States and foreign countries, however, may reduce or eliminate the amount
of foreign taxes to which the Fund would be subject.

SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional Shares. The Fund's dividends, and any
short-term capital gains, are taxable as ordinary income.

CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have
held the Fund Shares.
TOTAL RETURN

The Fund's cumulative total returns for Class A Shares, Class B Shares
and Class C Shares, for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996, were 15.60%, 15.00%, and 14.80%,
respectively. Cumulative total return reflects the Fund's total
performance over a specified period of time. This total return assumes and
is reduced by the payment of the maximum sales charge. The Fund's total
return is reflective of nine months of Fund activity since the Fund's date
of initial public investment.
The average annual total return for each class of Shares of the Fund is the
average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that
investment. The ending redeemable value is computed by multiplying the
number of Shares owned at the end of the period by the net asset value per
share at the end of the period. The number of Shares owned at the end of
the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Any applicable contingent deferred sales charge is deducted from the ending
value of the investment based on the lesser of the original purchase price
or the net asset value of Shares redeemed.

YIELD

The yield for each class of Shares of the Fund is determined by dividing
the net investment income per share (as defined by the Securities and
Exchange Commission) earned by any class of Shares over a thirty-day period
by the maximum offering price per share of the respective class on the last
day of the period. This value is annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a 12-month period and is
reinvested every six months. The yield does not necessarily reflect income
actually earned by the Fund because of certain adjustments required by the
Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to the shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any
class of Shares, the performance will be reduced for those shareholders
paying those fees.
PERFORMANCE COMPARISONS

and offering price per Share are factors in the computation of yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
oSTANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS (S&P
500), a composite index of common stocks in industry,
transportation, and financial and public utility companies, can be
used to compare to the total returns of funds whose portfolios are
invested primarily in common stocks. In addition, the S & P 500
assumes reinvestments of all dividends paid by stocks listed on its
index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in the Standard & Poor's
figures.
oLIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specified period of time. From time to
time, the Fund will quote its Lipper ranking in the "latin american
region funds" category in advertising and sales literature.
oMORGAN ▇▇▇▇▇▇▇ CAPITAL INTERNATIONAL WORLD INDICES, including, among
others, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Capital International Europe, Australia,
Far East Index (``EAFE Index''). The EAFE Index is an unmanaged

index of more than 1,000 companies of Europe, Australia, and the Far
East.
oMORGAN ▇▇▇▇▇▇▇ CAPITAL INTERNATIONAL LATIN AMERICA EMERGING MARKET
INDICES, including the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Emerging Markets Free Latin
America Index (which excludes Mexican banks and securities companies
which cannot be purchased by foreigners) and the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Emerging Markets Global Latin America Index. Both indices include
60% of the market capitalization of the following countries:
Argentina, Brazil, Chile, and Mexico. The indices are weighted by
market capitalization and are calculated without dividends
reinvested.
oIBBOTSON ASSOCIATES INTERNATIONAL BOND INDEX, which provides a
detailed breakdown of local market and currency returns since 1960.
▇▇▇▇▇ ▇▇▇▇▇▇▇ FOREIGN BOND INDEX, which provides simple average
returns for individual countries and GNP-weighted index, beginning
in 1975. The returns are broken down by local market and currency.
oMORNINGSTAR, INC. , an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
oData and mutual fund rankings published or prepared by
CDA/WIESENBERGER INVESTMENT COMPANY SERVICES that ranks and/or
compares mutual funds by overall performance, investment objectives,
assets, expense levels, periods of existence and/or other factors.
oFINANCIAL TIMES ACTUARIES INDICES--including the FTA-World Index
(and components thereof), which are based on stocks in major world
equity markets.

oFINANCIAL PUBLICATIONS: The Wall Street Journal, Business Week,
Changing Times, Financial World, Forbes, Fortune and Money
magazines, among others--provide performance statistics over
specified time periods.
oDOW ▇▇▇▇▇ INDUSTRIAL AVERAGE (``DJIA'') represents share prices of
selected blue-chip industrial corporations. The DJIA indicates
daily changes in the average price of stock of these corporations.
Because it represents the top corporations of America, the DJIA
index is a leading economic indicator for the stock market as a
whole.
oCNBC/Financial News Composite Index.
OTHE WORLD BANK PUBLICATION OF TRENDS IN DEVELOPING COUNTRIES (TIDE).
TIDE provides brief reports on most of the World Bank's borrowing
members. The World Development Report is published annually and
looks at global and regional economic trends and their implications
for the developing economies.
oSALOMON BROTHERS GLOBAL TELECOMMUNICATIONS INDEX is composed of
telecommunications companies in the developing and emerging
countries.
o DATASTREAM, INTERSEC, FACTSET, IBBOTSON ASSOCIATES, AND
WORLDSCOPE are database retrieval services for information
including, but not limited to, international financial and economic
data.
oINTERNATIONAL FINANCIAL STATISTICS, which is produced by the
International Monetary Fund.
oVarious publications and annual reports produced by the World Bank
and its affiliates.

oVarious publications from the International Bank for Reconstruction
and Development.
oVarious publications including, but not limited to, ratings agencies
such as ▇▇▇▇▇'▇ Investors Service, Inc., Fitch Investors Service,
Inc. and Standard & Poor's Ratings Group.
oWILSHIRE ASSOCIATES, which is an on-line database for international
financial and economic data including performance measures for a
wide range of securities.
oINTERNATIONAL FINANCE CORPORATION (IFC) EMERGING MARKETS DATA BASE,
which provides detailed statistics on stock and bond markets in
developing countries, including IFC market indices.
oVarious publications from the Organization for Economic Cooperation
and Development (OECD).
From time to time, the Fund may quote information including but not limited
to data regarding: individual countries, regions, world stock exchanges,
and economic and demographic statistics from sources deemed reliable.
Advertisements and other sales literature for any class of Shares may quote
total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an
investment in any class of Shares based on annual reinvestment of
dividends over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise the
performance of any class of Shares using charts, graphs, and descriptions,
compared to federally insured bank products including certificates of
deposit and time deposits and to money market funds using the Lipper
Analytical Services money market instruments average. In addition,
advertising and sales literature for the Fund may use charts and graphs to

illustrate the principles of dollar-cost averaging and may disclose the
amount of dividends paid by the Fund over certain periods of time.
Advertisements may quote performance information which does not reflect the
effect of the sales charge on Class A Shares.
Advertising and other promotional literature may include charts, graphs
and other illustrations using the Fund's returns, or returns in general,
that demonstrate basic investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment. In addition,
the Fund can compare its performance, or performance for the types of
securities in which it invests, to a variety of other investments, such as
bank savings accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Fund. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS

Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors. These traders
handle trillions of dollars in annual trading volume.
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Executive Vice President, oversees Federated
Investors' equity and high yield corporate bond management while ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Executive Vice President, oversees Federated Investors' domestic
fixed income management. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Executive Vice President,
oversees the management of Federated Investors' global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients is
headed by ▇▇▇▇ ▇. ▇▇▇▇▇▇, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'

portfolios. The marketing effort to trust clients is headed by ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country --supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by ▇▇▇▇▇ ▇. ▇▇▇▇, President, Federated Securities Corp.

FINANCIAL STATEMENTS

The financial statements for the Fund for the period ended November 30,
1996 are incorporated herein by reference to the Annual Report to
shareholders of the Fund dated November 30, 1996.

*source: Investment Company Institute

FEDERATED INTERNATIONAL HIGH INCOME FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

PROSPECTUS

The shares of Federated International High Income Fund (the "Fund") offered by
this prospectus represent interests in the Fund, which is a diversified
investment portfolio in World Investment Series, Inc. (the "Corporation"), an
open-end, management investment company (a mutual fund). The investment
objective of the Fund is to seek a high level of current income. The Fund has a
secondary objective of capital appreciation. The Fund invests primarily in a
diversified portfolio of government and corporate debt obligations of issuers in
emerging market countries and developed foreign countries.

This prospectus contains the information you should read and know before you
invest in Class A Shares, Class B Shares or Class C Shares of the Fund. Keep
this prospectus for future reference.

SPECIAL RISKS

THE FUND'S PORTFOLIO MAY CONSIST PRIMARILY OF LOWER-RATED DEBT OBLIGATIONS,

WHICH ARE COMMONLY REFERRED TO AS "JUNK BONDS." THESE LOWER-RATED BONDS MAY BE
MORE SUSCEPTIBLE TO REAL OR PERCEIVED ADVERSE ECONOMIC CONDITIONS THAN
INVESTMENT GRADE BONDS. THESE LOWER-RATED BONDS ARE REGARDED AS PREDOMINANTLY
SPECULATIVE WITH REGARD TO EACH ISSUER'S CONTINUING ABILITY TO MAKE INTEREST AND
PRINCIPAL PAYMENTS (I.E., THE BONDS ARE SUBJECT TO THE RISK OF DEFAULT). IN
ADDITION, THE SECONDARY TRADING MARKET FOR LOWER-RATED BONDS MAY BE LESS LIQUID
THAN THE MARKET FOR INVESTMENT GRADE BONDS. PURCHASERS SHOULD CAREFULLY ASSESS
THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE THE SECTION OF THIS
PROSPECTUS ENTITLED, "INVESTMENT RISKS".

Investing in emerging markets can involve significant risks due to market,
economic, and foreign currency exchange conditions.

The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, and Class C Shares dated January 31, 1997 with the
Securities and Exchange Commission ("SEC"). The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge, by calling 1-800-341-7400. To obtain other
information or make inquiries about the Fund, contact your financial
institution. The Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund are
maintained electronically with the SEC at Internet Web site
(▇▇▇▇://▇▇▇.▇▇▇.▇▇▇).

Prospectus dated January 31, 1997

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TABLE OF CONTENTS

Summary of Fund Expenses--Class A Shares.......................................1

Summary of Fund Expenses--Class B Shares.......................................2

Summary of Fund Expenses--Class C Shares.......................................3

Financial Highlights--Class A Shares...........................................4

Financial Highlights--Class B Shares...........................................5

Financial Highlights--Class C Shares...........................................6

Synopsis.......................................................................7

Investment Information.........................................................8

Investment Objectives........................................................8
Investment Policies..........................................................8
Acceptable Investments.......................................................8
Emerging Markets and Developed
Foreign Countries..........................................................8
Debt Securities..............................................................9
▇▇▇▇▇ ▇▇▇▇▇..................................................................9
Loan Participations and Assignments.........................................10
Convertible Securities......................................................10
Investing in Securities of Other

Investment Companies......................................................11
Restricted and Illiquid Securities..........................................11
Repurchase Agreements.......................................................11
When-Issued and Delayed Delivery
Transactions..............................................................12
Lending of Portfolio Securities.............................................12
Temporary Investments.......................................................12
Forward Commitments.........................................................12
Foreign Currency Transactions...............................................12
Forward Foreign Currency Exchange
Contracts.................................................................13
Options.....................................................................13
Futures and Options on Futures..............................................14
Swaps, Caps, Floors and Collars.............................................15

Investment Risks..............................................................16

Risk Characteristics of Foreign Securities..................................16
Currency Risks..............................................................17
Foreign Companies...........................................................18
U.S. Government Policies....................................................18
Risk Considerations in Emerging Markets.....................................18
Risk Factors Relating to Investing
in High Yield Securities..................................................19
Reducing Risks of Lower-Rated Securities....................................20
Investment Limitations......................................................20

Hub and Spoke Option........................................................21

Net Asset Value...............................................................22

Investing in the Fund.........................................................22

How to Purchase Shares........................................................23

Investing in Class A Shares.................................................23
Investing in Class B Shares.................................................25
Investing in Class C Shares.................................................26
Special Purchase Features...................................................27

Exchange Privilege............................................................28

How to Redeem Shares..........................................................29

Special Redemption Features.................................................30
Contingent Deferred Sales Charge............................................31
Elimination of Contingent Deferred
Sales Charge..............................................................32

Account and Share Information.................................................33

Fund Information..............................................................34

Management of the Corporation...............................................34

Portfolio Managers..........................................................35

Distribution of Shares......................................................36

Administration of the Fund....................................................38

Administrative Services.....................................................38
Expenses of the Fund and Class A Shares,
Class B Shares and Class C Shares.........................................38

Shareholder Information.......................................................39

Voting Rights...............................................................39

Tax Information...............................................................39

Federal Income Tax..........................................................39
State and Local Taxes.......................................................40

Performance Information.......................................................40

Appendix......................................................................41

Addresses.....................................................................45

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SUMMARY OF FUND EXPENSES
FEDERATED INTERNATIONAL HIGH INCOME FUND

CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................................................... 4.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) (1).............................................................. 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable).............................................. None
Exchange Fee.................................................................................................... None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (2)............................................................................... 0.00%
12b-1 Fee (3)................................................................................................... 0.00%
Total Other Expenses (after expense reimbursement).............................................................. 0.75%
Shareholder Services Fee......................................................................... 0.25%
Total Operating Expenses (4)........................................................................... 0.75%

(3) Class A Shares have no present intention of paying or accruing the 12b-1
fee during the fiscal year ending November 30, 1997. If Class A Shares were
paying or accruing the 12b-1 fee, Class A Shares would be able to pay up to
0.25% of its average daily net assets for the 12b-1 fee. See "Fund
Information".

(4) The total operating expenses would have been 9.21% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares of the Fund will

bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class A Shares" and "Fund
Information". Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.

EXAMPLE 1 year 3 years 5 years 10 years

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

--------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES
FEDERATED INTERNATIONAL HIGH INCOME FUND

CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................................... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)........................ None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) (1).............................................................. 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable).............................................. None
Exchange Fee.................................................................................................... None
ANNUAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (2)............................................................................... 0.00%
12b-1 Fee....................................................................................................... 0.75%
Total Other Expenses (after expense reimbursement).............................................................. 0.75%
Shareholder Services Fee......................................................................... 0.25%
Total Operating Expenses (3)(4)........................................................................ 1.50%

(1) The contingent deferred sales charge is 5.50% in the first year declining
to 1.00% in the sixth year and 0.00% thereafter. (See "Contingent Deferred
Sales Charge").

(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

(4) The total operating expenses would have been 9.96% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class B Shares" and "Fund
Information". Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF

SECURITIES DEALERS, INC.

EXAMPLE 1 year 3 years 5 years 10 years

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return, (2) redemption at the end of each time period, and (3) payment
of the maximum sales charge.................................................. $72 $92 $106 $158
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $15 $47 $82 $158

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

--------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES
FEDERATED INTERNATIONAL HIGH INCOME FUND

CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................................... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)........................ None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) (1).............................................................. 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable).............................................. None
Exchange Fee.................................................................................................... None

ANNUAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (2)............................................................................... 0.00%
12b-1 Fee....................................................................................................... 0.75%
Total Other Expenses (after expense reimbursement).............................................................. 0.75%
Shareholder Services Fee......................................................................... 0.25%
Total Operating Expenses (3)........................................................................... 1.50%

(1) The contingent deferred sales charge is 1.00% of the lesser of the original
purchase price or the net asset value of Shares redeemed within one year of
their purchase date. See "Contingent Deferred Sales Charge".

(3) The total operating expenses would have been 9.96% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class C Shares" and "Fund
Information". Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.

EXAMPLE 1 year 3 years 5 years 10 years

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return, (2) redemption at the end of each time period, and (3) payment
of the maximum sales charge.................................................. $26 $47 $82 $179
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $15 $47 $82 $179

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS A SHARES
FEDERATED INTERNATIONAL HIGH INCOME FUND
--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report, dated January 17, 1997, on the Fund's
financial statements for the period ended November 30, 1996, and on the
following table for the period presented, is included in the Annual Report,
which is incorporated by reference herein. This table should be read in
conjunction with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.

PERIOD ENDED
NOVEMBER 30,
1996(A)

NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income 0.17(e)
------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.13
------------------------------------------------------------------------------------------------------ -------
Total from investment operations 0.30
------------------------------------------------------------------------------------------------------ -------
LESS DISTRIBUTIONS
------------------------------------------------------------------------------------------------------
Distributions from net investment income (0.17)
------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.01)(b)
------------------------------------------------------------------------------------------------------ -------
Total distributions from net investment income (0.18)
------------------------------------------------------------------------------------------------------ -------
NET ASSET VALUE, END OF PERIOD $ 10.12
------------------------------------------------------------------------------------------------------ -------
TOTAL RETURN (C) 2.99%
------------------------------------------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS
------------------------------------------------------------------------------------------------------
Expenses 0.75%*
------------------------------------------------------------------------------------------------------
Net investment income 9.19%*
------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 8.46%*
------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $599
------------------------------------------------------------------------------------------------------
Average commission rate paid $0.0003
------------------------------------------------------------------------------------------------------
Portfolio turnover 0%
------------------------------------------------------------------------------------------------------

* Computed on an annualized basis.

(a) Reflects operations for the period from October 2, 1996 (date of initial
public investment) to November 30, 1996.

(b) Distributions in excess of net investment income were a result of certian
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.

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

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

(e) Per share information presented is based upon the bi-monthly average
number of shares outstanding.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1996, which can be obtained free of charge
from the Fund.

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS B SHARES
FEDERATED INTERNATIONAL HIGH INCOME FUND
--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

PERIOD ENDED
NOVEMBER 30,
1996(A)

NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income 0.18(b)
------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.11
------------------------------------------------------------------------------------------------------ -------
Total from investment operations 0.29
------------------------------------------------------------------------------------------------------ -------
LESS DISTRIBUTIONS
------------------------------------------------------------------------------------------------------
Distributions from net investment income (0.17)
------------------------------------------------------------------------------------------------------ -------
NET ASSET VALUE, END OF PERIOD $ 10.12
------------------------------------------------------------------------------------------------------ -------
TOTAL RETURN (C) 2.87%
------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
------------------------------------------------------------------------------------------------------
Expenses 1.50%*
------------------------------------------------------------------------------------------------------

Net investment income 8.92%*
------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 8.46%*
------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,397
------------------------------------------------------------------------------------------------------
Average commission rate paid $0.0003
------------------------------------------------------------------------------------------------------
Portfolio turnover 0%
------------------------------------------------------------------------------------------------------

* Computed on an annualized basis.

(a) Reflects operations for the period from October 2, 1996 (date of initial
public offering) to November 30, 1996.

(b) Per share information presented is based upon the bi-monthly average number
of shares outstanding.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1996, which can be obtained free of charge
from the Fund.

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--CLASS C SHARES
FEDERATED INTERNATIONAL HIGH INCOME FUND
--------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

PERIOD ENDED
NOVEMBER 30,
1996(A)

NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income 0.17(b)
------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.12
------------------------------------------------------------------------------------------------------ -------
Total from investment operations 0.29
------------------------------------------------------------------------------------------------------ -------
LESS DISTRIBUTIONS
------------------------------------------------------------------------------------------------------
Distributions from net investment income (0.17)
------------------------------------------------------------------------------------------------------ -------
NET ASSET VALUE, END OF PERIOD $ 10.12
------------------------------------------------------------------------------------------------------ -------
TOTAL RETURN (C) 2.87%
------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
------------------------------------------------------------------------------------------------------
Expenses 1.50%*
------------------------------------------------------------------------------------------------------

Net investment income 8.67%*
------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 8.46%*
------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $83
------------------------------------------------------------------------------------------------------
Average commission rate paid $0.0003
------------------------------------------------------------------------------------------------------
Portfolio turnover 0%
------------------------------------------------------------------------------------------------------

* Computed on an annualized basis.

(a) Reflects operations for the period from October 2, 1996 (date of initial
public offering) to November 30, 1996.

(b) Per share information presented is based upon the bi-monthly average number
of shares outstanding.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1996, which can be obtained free of charge.

-------------------------------------------------------

SYNOPSIS

The Corporation was established under the laws of the State of Maryland on
January 25, 1994. The Corporation's address is Federated ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,

▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The Articles of Incorporation permit the
Corporation to offer separate series of shares representing interests in
separate portfolios of securities. As of the date of this prospectus, the Board
of Directors (the "Directors") has established three classes of shares for the
Fund, known as Class A Shares, Class B Shares, and Class C Shares (individually
and collectively as the context requires, "Shares").

Shares of the Fund are designed for individuals and institutions seeking a high
level of current income by investing in a portfolio of government and corporate
debt obligations of issuers in emerging market countries and developed foreign
countries.

For information on how to purchase Shares of the Fund, please refer to "How to
Purchase Shares." The minimum initial investment for Class A Shares is $500. The
minimum initial investment for Class B Shares and Class C Shares is $1,500.
However, the minimum initial investment for a retirement account in any class is
$50. Subsequent investments in any class must be in amounts of at least $100,
except for retirement plans which must be in amounts of at least $50.
In general, Class A Shares are sold at net asset value plus an applicable sales
charge and are redeemed at net asset value. However, a contingent deferred sales
charge is imposed under certain circumstances. For a more complete description,
see "How to Redeem Shares."

Class B Shares are sold at net asset value. A contingent deferred sales charge
is imposed on certain Shares which are redeemed within six full years of
purchase. See "How to Redeem Shares."

Class C Shares are sold at net asset value. A contingent deferred sales charge

of 1.00% will be charged on assets redeemed within the first 12 months following
purchase. See "How to Redeem Shares."

In addition, the Fund pays a shareholder services fee at an annual rate not to
exceed 0.25% of average daily net assets. Additionally, information regarding
the exchange privilege offered with respect to the Fund and certain other funds
for which affiliates of Federated Investors serve as investment adviser or
principal underwriter (the "Federated Funds") can be found under "Exchange
Privilege."

Investors should be aware of the following general observations. The Fund may
make certain investments and employ certain investment techniques that involve
risks, including, but not limited to, entering into repurchase agreements,
lending portfolio securities, investing in restricted and illiquid securities,
investing in securities on a when-issued and delayed delivery basis, writing
call options and investing in foreign securities.

The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

-------------------------------------------------------

INVESTMENT INFORMATION

INVESTMENT OBJECTIVES

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

INVESTMENT POLICIES

The Fund pursues its investment objective by investing in a diversified
portfolio primarily consisting of government and corporate debt obligations of
issuers in emerging market countries and developed foreign countries. The Fund
intends to allocate its investments among at least three countries at all times
and does not expect to concentrate investments in any particular industry. The
Fund may invest up to 100% of its assets in either emerging or developed foreign
markets, if, in the judgment of the investment adviser, the Fund has the
opportunity to seek a high level of current income without undue risk to
principal. Unless indicated otherwise, the investment policies may be changed by
the Directors without the approval of shareholders. Shareholders will be
notified before any material changes in these policies become effective.

ACCEPTABLE INVESTMENTS

The securities in which the Fund may invest include foreign government and

corporate debt obligations, including, but not limited to ▇▇▇▇▇ ▇▇▇▇▇, Eurobonds
and convertible securities. The Fund may also invest in repurchase agreements,
engage in foreign currency transactions and purchase options and financial
futures contracts, and invest in bank loan participations and assignments, which
are fixed and floating rate loans arranged through private negotiations between
foreign entities. See "Loan Participations and Assignments" below.

EMERGING MARKETS AND DEVELOPED FOREIGN COUNTRIES

Emerging markets may include: Argentina, Bolivia, Botswana, Brazil, Chile,China,
Colombia, Cyprus, Czech Republic, Ecuador, Egypt, Ghana, Greece, Hungary, India,
Indonesia, Jordan, Kenya, Korea, Malaysia, Mauritius, Mexico, Morocco, Pakistan,
Peru, Philippines, Poland, Portugal, Singapore, Slovakia, South Africa, Sri
Lanka, Venezuela, and Zimbabwe; while developed foreign countries may include:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece,
Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal,
Spain, Sweden, Switzerland, and the United Kingdom. While the investment adviser
considers these countries eligible for investment, the Fund will not be invested
in all such markets at all times. Furthermore, the Fund may not pursue
investment in such countries due to lack of adequate custody of the Fund's
assets, overly burdensome restrictions and repatriation, lack of an organized
and liquid market, or unacceptable political or other risks.

Emerging markets companies are defined as (i) those for which the principal
securities trading market is an emerging market country, as described above;
(ii) those which are organized under the laws of, or with a principal office in,
an emerging market country; or (iii) those, wherever organized or traded, which
derive (directly or indirectly through subsidiaries) at least 50% of their total

assets, capitalization, gross revenue or profit from their most current year
from goods produced, services performed, or sales made in such emerging market
countries.

DEBT SECURITIES

The Fund allocates its assets among debt securities of issuers in two investment
areas: (1) emerging markets, and (2) developed foreign countries. The Fund
selects particular debt securities in each sector based on their relative
investment merits. Within both areas, the Fund selects debt securities from
those issued by governments, their agencies and instrumentalities; central
banks; and commercial banks and other corporate entities. Debt securities in
which the Fund may invest include bonds, notes, debentures, and other similar
instruments. The Fund may invest up to 100% of its total assets in foreign debt
and other fixed income securities that, at the time of purchase, may be rated as
low as C by Standard & Poor's Ratings Group ("S&P), Fitch Investors Service
("Fitch") or ▇▇▇▇▇'▇ Investors Service, Inc., ("Moody's"), or, if unrated, are
of comparable quality as determined by the investment adviser. Such debt
securities are commonly known as "junk bonds." The prices of fixed income
securities generally fluctuate inversely to the direction of interest rates.
Please refer to the Appendix in this prospectus for a description of these
ratings.

The Fund's investments in emerging market securities may consist substantially
of "▇▇▇▇▇ ▇▇▇▇▇" and other sovereign debt securities issued by emerging market
governments. Sovereign debt securities are those issued by governments that are
traded in the markets of developed countries or groups of developed countries.
The emerging market sovereign debt in which the Fund may invest is widely

considered to have a credit quality below investment grade. As a result, such
sovereign debt may be regarded as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations and involves major risk exposure to adverse conditions.

▇▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇ ▇▇▇▇▇ have been issued by Argentina, Brazil, Bulgaria, Costa Rica,
Dominican Republic, Jordan, Mexico, Nigeria, Philippines, Poland, Uruguay, and
Venezuela and are expected to be issued by Ecuador and other emerging market
countries. Approximately $163 billion in principal amount of ▇▇▇▇▇ ▇▇▇▇▇ is
outstanding, the largest proportion having been issued by Brazil and Argentina.
▇▇▇▇▇ ▇▇▇▇▇ issued by Brazil and Argentina currently are rated below investment
grade. As of the date of this prospectus, the Fund is not aware of the
occurrence of any payment defaults on ▇▇▇▇▇ ▇▇▇▇▇. Investors should recognize,
however, that ▇▇▇▇▇ ▇▇▇▇▇ have been issued only recently and, accordingly, do
not have a long payment history. ▇▇▇▇▇ ▇▇▇▇▇ may be collateralized or
uncollateralized, are issued in various currencies (primarily the U.S. dollar)
and are actively traded in the secondary market for Latin American debt. The
Salomon Brothers ▇▇▇▇▇ ▇▇▇▇ Index provides a benchmark that can be used to
compare returns of emerging market ▇▇▇▇▇ ▇▇▇▇▇ with returns in other bond
markets (e.g., the U.S. bond market.) ▇▇▇▇▇ ▇▇▇▇▇ are neither issued nor
guaranteed by the U.S. government.

The Fund may invest in either collateralized or uncollateralized ▇▇▇▇▇ ▇▇▇▇▇.
U.S. dollar-denominated, collateralized ▇▇▇▇▇ ▇▇▇▇▇, which may be fixed rate par
bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the

bonds. Interest payments on such bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at that time and is adjusted at regular
intervals thereafter.

LOAN PARTICIPATIONS AND ASSIGNMENTS

The Fund may invest in fixed and floating rate loans ("Loans") arranged through
private negotiations between a foreign entity and one or more financial
institutions ("Lender"). The Fund will invest in Loans in emerging markets. The
majority of such investments is expected to be in the form of participations in
Loans ("Participations") and assignments of portions of Loans from third parties
("Assignments"). Participations typically will result in the Fund having a
contractual relationship only with the Lender, not with the borrower government.
The Fund will have the right to receive payments of principal, interest and any
fees to which it is entitled only from the Lender selling the Participation and
only upon receipt by the Lender of the payments from the borrower. In connection
with purchasing Participations, the Fund generally will have no right to enforce
compliance by the borrower with the terms of the loan agreement relating to the
loan ("Loan Agreement"), nor any rights of set-off against the borrower, and the
Fund may not directly benefit from any collateral supporting the Loan in which
it has purchased the Participation. As a result, the Fund will assume the credit
risk of both the borrower and the Lender that is selling the Participation.

In the event of the insolvency of the Lender selling a Participation, the Fund
may be treated as a general creditor of the Lender and may not benefit from any

set-off between the Lender and the borrower. The Fund will acquire
Participations only if the Lender interpositioned between the Fund and the
borrower is determined by the adviser to be creditworthy. When the Fund
purchases Assignments from Lenders, the Fund will acquire direct rights against
the borrower on the Loan. However, since Assignments are arranged through
private negotiations between potential assignees and assignors, the rights and
obligations acquired by the Fund as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.

The liquidity of Assignments and Participations is limited and the Fund
anticipates that such securities could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market could have an
adverse impact on the value of such securities and on the Fund's ability to
dispose of particular Assignments or Participations when necessary to meet the
Fund's liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for the Fund to assign a value to those securities for purposes of
valuing the Fund's portfolio and calculating its net asset value. The investment
of the Fund in illiquid securities, including Assignments and Participations, is
limited to 15% of its net assets.

CONVERTIBLE SECURITIES

The Fund may invest in convertible securities rated, at the time of purchase, as
low as C by S&P, Fitch or ▇▇▇▇▇'▇, or, if unrated, of comparable quality as
determined by the investment adviser.

which allows convertible securities to be employed for a variety of different
investment strategies. In selecting a convertible security, the investment
adviser evaluates the investment characteristics of the convertible security as
a fixed income investment, and the investment potential of the underlying
security for capital appreciation.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

Due to restrictions on direct investment by foreign entities in certain foreign
countries, investments in other investment companies may be the most practical
or only manner in which the Fund can participate in the securities markets of
such countries. The Fund may also invest in other investment companies for the
purpose of investing its short term cash on a temporary basis. The Fund may
invest up to 10% of its total assets in the securities of other investment
companies. To the extent that the Fund invests in securities issued by other
investment companies, the Fund will indirectly bear its proportionate share of
any fees and expenses paid by such companies, in addition to the fees and
expenses payable directly by the Fund.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may otherwise invest pursuant to its investment
objective and policies but which are subject to restrictions on resale under
federal securities law. Securities that can be traded without material
restrictions in non-U.S. securities markets will not be treated as restricted,
even if they cannot be traded in U.S. securities markets without restriction.
Restricted securities may be issued by new and early stage companies which may
include a high degree of business and financial risk that can result in
substantial losses. As a result of the absence of a public trading market for
these securities, they may be less liquid than publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized from these sales could be less than those originally paid by
the Fund, or less than what may be considered the fair value of such securities.
Further, companies whose securities are not publicly traded may not be subject
to the disclosure and other investor protection requirements which might be
applicable if their securities were publicly traded. If such securities are
required to be registered under the securities laws of one or more jurisdictions
before being resold, the Fund may be required to bear the expense of
registration. The Fund will limit investments in illiquid securities, including
certain restricted securities not determined by the Directors to be liquid,
over-the counter options, swap agreements not determined to be liquid, and
repurchase agreements providing for settlement in more than even days after
notice, to 15% of its net assets.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements. Repurchase agreements are

arrangements by which the Fund purchases a security for cash and obtains a
simultaneous commitment from the seller (usually a bank or broker/dealer) to
repurchase the security at an agreed-upon price and specified future date. The
repurchase price reflects an agreed-upon interest rate for the time period of
the agreement. The Fund's risk is the inability of the seller to pay the
agreed-upon price on the delivery date. However, this risk is tempered by the
ability of the Fund to sell the security in the open market in the case of a
default. In such a case, the Fund may incur costs in disposing of the security
which would increase Fund expenses. The investment adviser will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.

WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS

values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.

LENDING OF PORTFOLIO SECURITIES

TEMPORARY INVESTMENTS

For temporary defensive purposes, when the investment adviser determines that
market conditions warrant, the Fund may invest up to 100% of total assets in
U.S. and foreign debt instruments as well as cash or cash equivalents, including
foreign and domestic money market instruments, short-term government and
corporate obligations, and repurchase agreements. Such investments will be made
with the intent of preserving shareholders' capital and shall be consistent with
the Fund's investment objective.

FORWARD COMMITMENTS

Forward commitments are contracts to purchase securities for a fixed price at a

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

FOREIGN CURRENCY TRANSACTIONS

that might result from a relative increase in the value of such currencies and
might, in certain cases, result in losses to the Fund. Further, the Fund may be
affected either unfavorably or favorably by fluctuations in the relative rates
of exchange between the currencies of different nations.

Cross-hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

A forward foreign currency exchange contract ("forward contract") is an
obligation to purchase or sell an amount of a particular currency at a specific
price and on a future date agreed upon by the parties. Generally, no commission
charges or deposits are involved. At the time the Fund enters into a forward
contract, Fund assets with a value equal to the Fund's obligation under the
forward contract are segregated and are maintained until the contract has been
settled. The Fund will not enter into a forward contract with a term of more
than one year. The Fund will generally enter into a forward contract to provide
the proper currency to settle a securities transaction at the time the
transaction occurs ("trade date"). The period between trade date and settlement
date will vary between 24 hours and 60 days, depending upon local custom.

when making investment decisions, the investment adviser believes that it is
important to be able to enter into forward contracts when it believes the
interests of the Fund will be served. The Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of the value of the Fund's assets denominated in that currency at the time the
contract was initiated, but as consistent with their other investment policies
and as not otherwise limited in their ability to use this strategy.

OPTIONS

The Fund may deal in options on foreign currencies, securities, and securities
indices, and on futures contracts involving these items, which options may be
listed for trading on an international securities exchange or traded over-the-
counter. The Fund may use options to manage interest rate and currency risks.
The Fund may also write covered call options and secured put options to generate
income or lock in gains. A call option gives the purchaser the right to buy, and
the writer the obligation to sell, the underlying currency, security or other
asset at the exercise price during the option period. A put option gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying currency, security or other asset at the exercise price during the
option period. The writer of a covered call owns assets that are acceptable for
escrow, and the writer of a secured put invests an amount not less than the
exercise price in eligible assets to the extent that it is obligated as a
writer. If a call written by the Fund is exercised, the Fund foregoes any
possible profit from an increase in the market price of the underlying asset
over the exercise price plus the premium received. In writing puts, there is the

risk that the Fund may be required to take delivery of the underlying asset at a
disadvantageous price.

Over-the-counter options ("OTC options") differ from exchange traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event the Fund
may experience material losses. However, in writing options, the premium is paid
in advance by the dealer. OTC options, which may not be continuously liquid, are
available for a greater variety of assets, and with a wider range of expiration
dates and exercise prices, than are exchange traded options. It is not certain
that a secondary market for positions in options, or futures contracts (see
below), will exist at all times. Although the investment adviser will consider
liquidity before entering into these transactions, there is no assurance that a
liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market.

FUTURES AND OPTIONS ON FUTURES

liquidation value of the Fund's assets, provided further that in the case of an
option that is in-the-money at the time of the purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. In addition, the Fund may not
sell futures contracts if the value of such futures contracts exceeds the total
market value of the Fund's portfolio securities. Futures contracts and options
thereon sold by the Fund are generally subject to segregation and coverage
requirements established by either the Commodities Futures Trading Commission
("CFTC") or the Securities and Exchange Commission ("SEC"), with the result
that, if the Fund does not hold the instrument underlying the futures contract
or option, the Fund will be required to segregate on an ongoing basis with its
custodian cash, U.S. government securities, or other liquid high grade debt
obligations in an amount at least equal to the Fund's obligations with respect
to such instruments.

advance, it may enter into futures contracts to purchase the index in order to
gain rapid market exposure that may in part or entirely offset increases in the
cost of securities that it intends to purchase. In many of these transactions,
the Fund will purchase such securities upon termination of the futures position

but, depending on market conditions, a futures position may be terminated
without the corresponding purchases of common stock. The Fund may also invest in
securities index futures contracts when the investment adviser believes such
investment is more efficient, liquid, or cost-effective than investing directly
in the securities underlying the index.

between the change in market value of the securities held by the Fund and the
prices of the futures and options thereon relating to the securities purchased
or sold by the Fund. The use of futures and related options may reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements but they can also reduce the opportunity for gain by offsetting the
positive effect of favorable price movements in positions. No assurance can be
given that the investment adviser's judgment in this respect will be correct.

New futures contracts, options thereon, and
other financial products and risk management
techniques continue to be developed. The Fund
may use these investments and techniques
to the extent consistent with its investment
objective and regulatory and federal tax
considerations.

SWAPS, CAPS, FLOORS AND COLLARS

The Fund may enter into interest rate, currency and index swaps, and purchase or
sell related caps, floors and collars and other derivative instruments. The Fund

expects to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio, to protect
against currency fluctuations, as a technique for managing the portfolio's
duration (i.e, the price sensitivity to changes in interest rates) or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Fund intends to use these transactions as ▇▇▇▇▇▇, and
neither will sell interest rate caps or floors if it does not own securities or
other instruments providing an income stream roughly equivalent to what the Fund
may be obligated to pay. Interest rate swaps involve the exchange by the Fund
with another party of their respective commitments to pay or receive interest
(for example, an exchange of floating rate payment for fixed rate payments) with
respect to a notional amount of

principal. A currency swap is an agreement to exchange cash flows on a notional
amount based on changes in the value of the reference indices.

The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.

-------------------------------------------------------

INVESTMENT RISKS

RISK CHARACTERISTICS OF FOREIGN SECURITIES

Investing in non-U.S. securities carries substantial risks in addition to those
associated with domestic investments. In an attempt to reduce some of these
risks, the Fund intends to diversify its investments broadly among foreign
countries which may include both developed and developing countries. The Fund
may take advantage of the unusual opportunities for higher returns available
from investing in developing countries. These investments carry considerably
more volatility and risk because they generally are associated with less mature
economies and less stable political systems.

imposed by the charters of individual companies to prevent, among other
concerns, violation of foreign investment limitations.

of a portfolio security due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.

CURRENCY RISKS

Because the majority of securities purchased by the Fund are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value; the value of interest earned;
gains and losses realized on the sale of securities; and net investment income
and capital gain, if any, to be distributed to shareholders by the Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of Fund
assets denominated in the currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease. Under the United States Internal
Revenue Code, as amended (the "Code"), the Fund is required to separately
account for the foreign currency component of gains or losses, which will
usually be viewed under the Code as items of ordinary and distributable income
or loss, thus affecting the Fund's distributable income. (See "Federal Income
Tax").

currency, it may incur conversion costs. Foreign exchange dealers may realize a
profit on the difference between the price at which they buy and sell
currencies.

FOREIGN COMPANIES

Other differences between investing in foreign and U.S. companies include:

less publicly available information about foreign issuers;

credit risks associated with certain foreign governments; the lack of uniform
accounting, auditing, and financial reporting standards and practices or
regulatory requirements comparable to those applicable to U.S. companies;

less readily available market quotations on foreign issues;

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

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

the limited size of many foreign securities markets and limited trading volume
in issuers compared to the volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the quality of
securities;

the likelihood that securities of foreign issuers may be less liquid or more

volatile;

foreign brokerage commissions may be higher;

unreliable mail service between countries;

political or financial changes which adversely affect investments in some
countries;

increased risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities;

certain markets may require payment for securities before delivery;

religious and ethnic instability; and

certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests.

U.S. GOVERNMENT POLICIES

RISK CONSIDERATIONS IN
EMERGING MARKETS

Investing in securities of issuers in emerging market countries involves
exposure to significantly higher risk than investing in countries with developed
markets. Emerging market countries may have economic structures that are
generally less diverse and mature and political systems that can be expected to
be less stable than those of developed countries.

Securities prices in emerging market countries can be significantly more
volatile than in developed countries, reflecting the greater uncertainties of
investing in lesser developed markets and economies. In particular, emerging
market countries may have relatively unstable governments, and may present the
risk of nationalization of businesses, expropriation, confiscatory taxation or,
in certain instances, reversion to closed market, centrally planned economies.
Such countries may also have restrictions on foreign ownership or prohibitions
on the repatriation of assets, and may have less protection of property rights
than developed countries.

The economies of emerging market countries may be predominantly based on only a
few industries or dependent on revenues from particular commodities or on
international aid or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from extreme and volatile
debt burdens or inflation rates. In addition, securities markets in emerging
market countries may trade a small number of securities and may be unable to
respond effectively to increases in

trading volume, potentially resulting in a lack of liquidity and in volatility
in the price of securities traded on those markets. Also, securities markets in
emerging market countries typically offer less regulatory protection for

investors.

RISK FACTORS RELATING TO INVESTING IN HIGH YIELD SECURITIES

The debt securities in which the Fund invests are usually not in the three
highest rating categories of a nationally recognized statistical rating
organization (AAA, AA, or A for S&P or Fitch and Aaa, Aa, or A for ▇▇▇▇▇'▇), but
are in the lower rating categories or are unrated, but are of comparable quality
as determined by the investment adviser and have speculative characteristics or
are speculative. Lower-rated bonds or unrated bonds are commonly referred to as
"junk bonds." There is no minimal acceptable rating for a security to be
purchased or held in the Fund's portfolio, and the Fund may, from time to time,
purchase or hold debt securities rated in the lowest rating category. A
description of the rating categories is contained in the Appendix to this
prospectus.

Lower-rated securities will usually offer higher yields than higher-rated
securities. However, there is more risk associated with these investments. This
is because of reduced creditworthiness and increased risk of default.
Lower-rated securities generally tend to reflect short-term corporate and market
developments to a greater extent than higher-rated securities which react
primarily to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the price or liquidity of
lower-rated securities could include adverse news affecting major issuers,
underwriters, or dealers of lower-rated corporate debt obligations. In addition,
since there are fewer investors in lower-rated securities, it may be harder to
sell the securities at an optimum time.

As a result of these factors, lower-rated securities tend to have more price
volatility and carry more risk to principal and income than higher-rated
securities.

An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than they had bargained for at the time such bonds
were purchased. In the event of a restructuring, the Fund may bear additional
legal or administrative expenses in order to maximize recovery from an issuer.

The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds. Adverse publicity and the
perception of investors relating to issuers, underwriters, dealers or underlying
business conditions, whether or not warranted by fundamental analysis, may
affect the price or liquidity of lower-rated bonds. On occasion, therefore, it
may become difficult to price or dispose of a particular security in the
portfolio.

Many corporate debt obligations, including many lower-rated bonds, permit the
issuers to call the security and thereby redeem their obligations earlier than
the stated maturity dates. Issuers are more likely to call bonds during periods
of declining interest rates. In these cases, if the Fund owns a bond which is

called, the Fund will receive its return of principal earlier than

expected and would likely be required to reinvest the proceeds at lower interest
rates, thus reducing income to the Fund.

REDUCING RISKS OF LOWER-RATED SECURITIES

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

CREDIT RESEARCH

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

DIVERSIFICATION

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

ECONOMIC ANALYSIS

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

PORTFOLIO TURNOVER

Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the Fund's
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. The Fund's portfolio turnover rate is not expected to exceed 200%.
The Fund's rate of portfolio turnover may exceed that of certain other mutual
funds with the same investment objective. A higher rate of portfolio turnover
involves correspondingly greater transaction expenses which must be borne
directly by the Fund and, thus, indirectly by its shareholders. In addition, a
high rate of portfolio turnover may result in the realization of larger amounts
of capital gains which, when distributed to the Fund's shareholders, are taxable
to them. (Further information is contained in the Fund's Statement of Additional
Information within the sections "Brokerage Transactions" and "Tax Status").
Nevertheless, transactions for the Fund's portfolio will be based only upon
investment considerations and will not be limited by any other considerations
when the Fund's adviser deems it appropriate to make changes in the Fund's
portfolio.

INVESTMENT LIMITATIONS

The Fund will not:

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

with respect to 75% of its total assets, invest more than 5% of the value of
its total assets

in securities of any one issuer (other than cash, cash items, or securities
issued or guaranteed by the U.S. government and its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) or acquire more than 10% of the outstanding voting securities of
any one issuer.

The above investment limitations cannot be changed without shareholder approval.

HUB AND SPOKE(R) OPTION

If the Directors determine it to be in the best interest of the Fund and its
shareholders, the Fund may in the future seek to achieve its investment
objective by investing all of its assets in another investment company having
the same investment objective and substantially the same investment policies and
restrictions as those applicable to the Fund. It is expected that any such

investment company would be managed in substantially the same manner as the
Fund.

The initial shareholder of the Fund (who is an affiliate of Federated Securities
Corp.) voted to vest authority to use this investment structure in the sole
discretion of the Directors. No further approval of shareholders is required.
Shareholders will receive at least 30 days prior notice of any such investment.

In making its determination, the Directors will consider, among other things,the
benefits to shareholders and/or the opportunity to reduce costs and achieve
operational efficiencies. Although it is expected that the Directors will not
approve an arrangement that is likely to result in higher costs, no assurance is
given that costs will remain the same or be materially reduced if this
investment structure is implemented.

-------------------------------------------------------
NET ASSET VALUE

-------------------------------------------------------

INVESTING IN THE FUND

The Fund offers investors three classes of Shares that carry sales charges and
contingent deferred sales charges in different forms and amounts and which bear
different levels of expenses.

CLASS A SHARES

An investor who purchases Class A Shares pays a maximum sales charge of 4.50% at
the time of purchase. As a result, Class A Shares qualify for reduced sales
charges. See "Reducing or Eliminating the Sales Charge--Class A Shares." Class A
Shares have no conversion feature.

CLASS B SHARES

Class B Shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 5.50% if redeemed within six full
years following purchase. Class B Shares will automatically convert into Class A
Shares, based on relative net asset value, on or around the fifteenth of the
month eight full years after the purchase date. Class B Shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made, but (until conversion) will have a higher expense
ratio and pay lower dividends than Class A Shares due to the 12b-1 fee.

CLASS C SHARES

Class C Shares are sold without an initial sales charge, but are subject to a
1.00% contingent deferred sales charge on assets redeemed within the first 12
months following purchase. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but will have a higher expense ratio and pay lower dividends than Class A
Shares due to the 12b-1 fee. Class C Shares have no conversion feature.

-------------------------------------------------------
HOW TO PURCHASE SHARES

Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500 for Class A Shares and $1,500 for
Class B Shares and Class C Shares. Additional investments can be made for as
little as $100. The minimum initial and subsequent investment for retirement

plans is only $50. (Financial institutions may impose different minimum
investment requirements on their customers.)

In connection with any sale, Federated Securities Corp., may from time to time,
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.

INVESTING IN CLASS A SHARES

Class A Shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:

DEALER
SALES CHARGE SALES CHARGE CONCESSION
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF PUBLIC OF NET OF PUBLIC
AMOUNT OF OFFERING AMOUNT OFFERING
TRANSACTION PRICE INVESTED PRICE

Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less
than $250,000 3.75% 3.90% 3.25%
$250,000 but less
than $500,000 2.50% 2.56% 2.25%
$500,000 but less
than $1 million 2.00% 2.04% 1.80%
$1 million or
greater 0.00% 0.00% 0.25%*

*See sub-section entitled "Dealer Concession."

No sales charge is imposed for Class A Shares purchased through financial
intermediaries that do not receive a reallowance of a sales charge. However,
investors who purchase Shares through a trust department, investment adviser, or
other financial intermediary may be charged a service or other fee by the
financial intermediary. Additionally no sales charge is imposed on shareholders
designated as "Liberty Life Members" or on Class A Shares purchased through
"wrap accounts" or similar programs, under which clients pay a fee for services.

DEALER CONCESSION

For sales of Class A Shares, a dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not paid to a
dealer will be retained by the distributor. However, the distributor may offer
to pay dealers up to 100% of the sales charge retained by it. Such payments may
take the form of cash or promotional incentives, such as reimbursement of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales charge; however, the distributor will make
twelve monthly payments to the dealer totaling 0.25% of the public offering
price over the first year following the purchase. Such payments are based on the
original purchase price of Shares outstanding at each month end.

REDUCING OR ELIMINATING
THE SALES CHARGE

The sales charge can be reduced or eliminated on the purchase of Class A Shares
through:

quantity discounts and accumulated purchases;

concurrent purchases;

signing a 13-month letter of intent;

using the reinvestment privilege; or

purchases with proceeds from redemptions of unaffiliated investment company
shares.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

As shown in the table on page, larger purchases reduce the sales charge paid.

The Fund will combine purchases of Class A Shares made on the same day by the
investor, the investor's spouse, and the investor's children under age 21 when
it calculates the sales charge. In addition,

the sales charge, if applicable, is reduced or eliminated for purchases made at
one time by a trustee or fiduciary for a single trust estate or a single
fiduciary account.

If an additional purchase of Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.

To receive the sales charge reduction or elimination, Federated Securities Corp.
must be notified by the shareholder in writing or by his financial institution
at the time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge reduction or elimination, a
shareholder has the privilege of combining concurrent purchases of Class A
Shares of two or more funds for which affiliates of Federated Investors serve as
investment adviser or principal underwriter ("Federated Funds"), the purchase
price of which includes a sales charge. For example, if a shareholder

concurrently invested $80,000 in Class A Shares of another Federated Fund with a
sales charge, and $20,000 in Class A Shares of this Fund, the sales charge would
be reduced. To receive this sales charge reduction or elimination, Federated
Securities Corp. must be notified by the shareholder in writing or by his
financial institution at the time the concurrent purchases are made. The Fund
will reduce or eliminate the sales charge after it confirms the purchases.

LETTER OF INTENT

If a shareholder intends to purchase at least $100,000 of Class A Shares of
Federated Funds (excluding money market funds) over the next 13 months, the
sales charge may be reduced or eliminated by signing a letter of intent to that
effect. This letter of intent includes a provision for a sales charge adjustment
depending on the amount actually purchased within the 13-month period and a
provision for the custodian to hold up to 5.50% of the total amount intended to
be purchased in escrow (in Shares) until such purchase is completed.

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in Class A Shares of any Federated
Funds, excluding money market accounts, will be aggregated to provide a purchase

credit towards fulfillment of the letter of intent. Prior trade prices will not
be adjusted.

REINVESTMENT PRIVILEGE

the shareholder redeems his Class A Shares in the Fund, there may be tax
consequences.

PURCHASES WITH PROCEEDS FROM
REDEMPTIONS OF UNAFFILIATED
INVESTMENT COMPANIES

Investors may purchase Class A Shares at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an unaffiliated
investment company that were purchased or redeemed with a sales charge or
commission and were not distributed by Federated Securities Corp. The purchase
must be made within 60 days of the redemption, and Federated Securities Corp.
must be notified by the investor in writing, or by his financial institution, at
the time the purchase is made. From time to time, the Fund may offer dealers a
payment of .50% for Shares purchased under this program. If Shares are purchased
in this manner, redemptions of these shares will be subject to a contingent
deferred sales charge for one year from the date of purchase. Shareholders will

be notified prior to the implementation of any special offering as described
above.

INVESTING IN CLASS B SHARES

Class B Shares are sold at their net asset value next determined after an order
is received. While Class B Shares are sold without an initial sales charge,
under certain circumstances described under "Contingent Deferred Sales
Charge--Class B Shares," a contingent deferred sales charge may be applied by
the distributor at the time Class B Shares are redeemed.

CONVERSION OF CLASS B SHARES

Class B Shares will automatically convert into Class A Shares on or around the
fifteenth of the month eight full years after the purchase date, except as noted
below, and will no longer be subject to a distribution services fee (see
"Distribution of Shares"). Such conversion will be on the basis of the relative
net asset values per share, without the imposition of any sales charge, fee or
other charge. Class B Shares acquired by exchange from Class B Shares of another
Federated Fund will convert into Class A Shares based on the time of the initial
purchase. For purposes of conversion to Class A Shares, Shares purchased through
the reinvestment of dividends and distributions paid on Class B Shares will be
considered to be held in a separate sub-account. Each time any Class B Shares in
the shareholder's account (other than those in the sub-account) convert to Class
A Shares, an equal pro rata portion of the Class B Shares in the sub-account
will also convert to Class A Shares. The conversion of Class B Shares to Class A
Shares is subject to the continuing availability of a ruling from the Internal
Revenue Service or an opinion of counsel that such conversions will not

constitute taxable events for federal tax purposes. There can be no assurance
that such ruling or opinion will be available, and the conversion of Class B
Shares to Class A Shares will not occur if such ruling or opinion is not
available. In such event, Class B Shares would continue to be subject to higher
expenses than Class A Shares for an indefinite period.

Orders for $250,000 or more of Class B Shares will automatically be invested in
Class A Shares.

INVESTING IN CLASS C SHARES

Class C Shares are sold at net asset value next determined after an order is
received. A contingent deferred sales charge of 1.00% will be charged on assets
redeemed within the first full 12 months following purchase. For a complete
description of this charge see "Contingent Deferred Sales Charge--Class C
Shares."

PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION

time) in order for Shares to be purchased at that day's price. It is the
financial institution's responsibility to transmit orders promptly. Financial
institutions may charge additional fees for their services. The financial
institution which maintains investor accounts in Class B Shares or Class C
Shares with the Fund must do so on a fully disclosed basis unless it accounts
for share ownership periods used in calculating the contingent deferred sales
charge (see "Contingent Deferred Sales Charge"). In addition, advance payments
made to financial institutions may be subject to reclaim by the distributor for
accounts transferred to financial institutions which do not maintain investor
accounts on a fully disclosed basis and do not account for share ownership
periods.

PURCHASING SHARES BY WIRE

Once an account has been established, Shares may be purchased by Federal Reserve
wire by calling the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank receives
payment by wire. Federal funds should be wired as follows: Federated Shareholder
Services Company, ▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇; Attn:
EDGEWIRE; For Credit to: (Fund Name) (Fund Class); (Fund Number--this number can
be found on the account statement or by contacting the Fund); Account Number;
Trade Date and Order Number; Group Number or Dealer Number; Nominee or
Institution Name; and ABA Number ▇▇▇▇▇▇▇▇▇. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement.

PURCHASING SHARES BY CHECK

Once an account has been established, Shares may be purchased by mailing a check
made payable to the name of the Fund (designate class of Shares and account
number to: Federated Shareholder Services Company, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇. Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received).

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM

RETIREMENT PLANS

Fund Shares can be purchased as an investment for retirement plans or ▇▇▇
accounts. For further details, contact the Fund and consult a tax adviser.

-------------------------------------------------------
EXCHANGE PRIVILEGE

CLASS A SHARES

CLASS B SHARES

Class B shareholders may exchange all or some of their Shares for Class B Shares
of other Federated Funds. (Not all Federated Funds currently offer Class B
Shares. Contact your financial institution regarding the availability of Class B
Shares of the Federated Funds). Exchanges are made at net asset value without
being assessed a contingent deferred sales charge on the exchanged Shares. To
the extent that a Class B shareholder exchanges Shares for Class B Shares in
other Federated Funds, the time for which the exchanged-for Shares are to be
held will be added to the time for which exchanged-from Shares were held for
purposes of satisfying the applicable holding period.

CLASS C SHARES

Class C shareholders may exchange all or some of their Shares for Class C Shares
of other Federated Funds at net asset value without a contingent deferred sales
charge. (Not all Federated Funds currently offer Class C Shares. Contact your
financial institution regarding the availability of Class C Shares of the
Federated Funds.) To the extent that a Class C shareholder exchanges Shares for
Class C Shares of other Federated Funds, the time for which the exchanged-for

Shares are to be held will be added to the time for which exchanged-from

Shares were held for purposes of satisfying the applicable holding period. For
more information, see "Contingent Deferred Sales Charge."

Please contact your financial insitution directly or Federated Securities Corp.
at 1-800-341-7400 for more information on and prospectuses for the Federated
Funds into which your Shares may be exchanged free of charge.

Shareholders of Class A Shares who have been designated Liberty Life Members are
exempt from sales charges on future purchases in and exchanges between the Class
A Shares of any Federated Fund, as long as they maintain a $500 balance in one
of the Federated Funds.

REQUIREMENTS FOR EXCHANGE

Upon receipt of proper instructions and required supporting documents, Shares
submitted for exchange are redeemed and proceeds invested in the same class of
Shares of the other fund. The exchange privilege may be modified or terminated
at any time. Shareholders will be notified of the modification or termination of

the exchange privilege.

TAX CONSEQUENCES

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the circumstances, a capital gain or loss may be
realized.

MAKING AN EXCHANGE

Instructions for exchanging may be given in writing or by telephone. Written
instructions may require a signature guarantee. Shareholders of the Fund may
have difficulty in making exchanges by telephone through brokers and other
financial institutions during times of drastic economic or market changes. If a
shareholder cannot contact his broker or financial institution by telephone, it
is recommended that an exchange request be made in writing and sent by overnight
mail to Federated Shareholder Services Company, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.

TELEPHONE INSTRUCTIONS

are not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. Shares may be exchanged between two funds by
telephone only if the two funds have identical shareholder registrations.

Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder Services Company, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, and deposited to the shareholder's account before
being exchanged. Telephone exchange instructions are recorded and will be
binding upon the shareholder. Such instructions will be processed as of 4:00
p.m. (Eastern time) and must be received by the Fund before that time for Shares
to be exchanged the same day. Shareholders exchanging into a Fund will begin
receiving dividends the following business day. This privilege may be modified
or terminated at any time.

-------------------------------------------------------

HOW TO REDEEM SHARES

Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Investors who redeem Shares through a financial intermediary may be
charged a service fee by that financial intermediary. Redemption requests must
be received in proper form and can be made as described below.

REDEEMING SHARES THROUGH YOUR FINANCIAL INSTITUTION

Shares may be redeemed in any amount by calling the Fund provided the Fund has a
properly completed authorization form. These forms can be obtained from
Federated Securities Corp. Proceeds will be mailed in the form of a check to the
shareholder's address of record or wire transfered to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System.
The minimum amount for a wire transfer is $1,000. Proceeds from redeemed Shares
purchased by check or through ACH will not be wired until that method of payment
has cleared. Proceeds from redemption requests received on holidays when wire
transfers are restricted will be wired the following business day. Questions
about telephone redemptions on days when wire transfers are restricted should be

directed to your shareholder services representative at the telephone number
listed on your account statement.

REDEEMING SHARES BY MAIL

Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, Fund Name, Fund Class, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.

The written request should state: the Fund Name and Class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of

the account must sign the request exactly as the shares are registered.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after the receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed. Shareholders requesting a redemption of any amount to be

sent to an address other than that on record with the Fund or a redemption
payable other than to the shareholder of record must have their signatures
guaranteed by a commercial or savings bank, trust company or savings association
whose deposits are insured by an organization which is administered by the
Federal Deposit Insurance Corporation; a member firm of a domestic stock
exchange; or any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934. The Fund does not accept signatures guaranteed
by a notary public.

SPECIAL REDEMPTION FEATURES

SYSTEMATIC WITHDRAWAL PROGRAM

his financial institution. Due to the fact that Class A Shares are sold with a
sales charge, it is not advisable for shareholders to continue to purchase Class
A Shares while participating in this program. A contingent deferred sales charge
may be imposed on Class B Shares and Class C Shares.

CONTINGENT DEFERRED SALES CHARGE

Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:

CLASS A SHARES

Class A Shares purchased under a periodic special offering with the proceeds of
a redemption of shares of an unaffiliated investment company purchased or
redeemed with a sales charge and not distributed by Federated Securities Corp.
may be charged a contingent deferred sales charge of .50% for redemptions made
within one full year of purchase. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Class A Shares at the time of purchase or the net asset value of the redeemed
Class A Shares at the time of redemption.

CLASS B SHARES

Class B Shares at the time of purchase or the net asset value of the redeemed
Class B Shares at the time of redemption in accordance with the following
schedule:

CONTINGENT
YEAR OF REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE

First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%

CLASS C SHARES

CLASS A SHARES, CLASS B SHARES,
AND CLASS C SHARES

gains; (2) Shares held for more than six full years from the date of purchase
with respect to Class B Shares and more than one full year from the date of
purchase with respect to Class C Shares and applicable Class A Shares; (3)
Shares held for fewer than six years with respect to Class B Shares and for less
than one full year from the date of purchase with respect to Class C Shares and
applicable Class A Shares on a first-in, first-out basis. A contingent deferred
sales charge is not assessed in connection with an exchange of Fund Shares for
Shares of other Federated Funds in the same class (see "Exchange Privilege").
Any contingent deferred sales charge imposed at the time the exchanged-for
Shares are redeemed is calculated as if the shareholder had held the Shares from
the date on which he became a shareholder of the exchanged-from Shares.
Moreover, the contingent deferred sales charge will be eliminated with respect
to certain redemptions (see "Elimination of Contingent Deferred Sales Charge").

ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE

Charge through a Systematic Withdrawal Program, the redemptions of Class B
Shares must

be from an account: that is at least 12 months old, has all Fund distributions
reinvested in Fund Shares, and has a value of at least $10,000 when the
Systematic Withdrawal Program is established. Qualifying redemptions may not
exceed 1.00% monthly of the account value as periodically determined by the
Fund. For more information regarding the elimination of the Contingent Deferred
Sales Charge through a Systematic Withdrawal Program contact your financial
intermediary or the Fund. No contingent deferred sales charge will be imposed on
redemptions of Shares held by Directors, employees and sales representatives of
the Fund, the distributor, or affiliates of the Fund or distributor; employees
of any financial institution that sells Shares of the Fund pursuant to a sales
agreement with the distributor, and their immediate family members; and spouses
and children under the age of 21 of the aforementioned persons. Finally, no
contingent deferred sales charge will be imposed on the redemption of Shares
originally purchased through a bank trust department, an investment adviser
registered under the Investment Advisers Act of 1940 or retirement plans where
the third party administrator has entered into certain arrangements with
Federated Securities Corp. or its affiliates, or any other financial
institution, to the extent that no payments were advanced for purchases made
through such entities. The Directors reserve the right to discontinue
elimination of the contingent deferred sales charge. Shareholders will be
notified of such elimination. Any Shares purchased prior to the termination of
such waiver would have the contingent deferred sales charge eliminated as
provided in the Fund's prospectus at the time of the purchase of the Shares. If
a shareholder making a redemption qualifies for an elimination of the contingent
deferred sales charge, the shareholder must notify Federated Securities Corp. or

the transfer agent in writing that he is entitled to such elimination.

-------------------------------------------------------

ACCOUNT AND SHARE
INFORMATION

CERTIFICATES AND CONFIRMATIONS

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared daily and paid monthly to all shareholders invested in
the Fund on the record date. Dividends and distributions are automatically
reinvested in additional Shares of the Fund on payment dates at the ex-dividend
date net asset value without a sales charge, unless shareholders request cash
payments on the new account form or by contacting the transfer agent. All
shareholders on the record date are entitled to the dividend. If Shares are
redeemed or exchanged prior to the record date or purchased after the record

date, those Shares are not entitled to that quarter's dividend.

CAPITAL GAINS

Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.

ACCOUNTS WITH LOW BALANCES

minimum value of $500 or the required minimum value of $1,500 for Class B Shares
and Class C Shares. This requirement does not apply, however, if the balance
falls below the required minimum value because of changes in the net asset value
of the respective Share class. Before Shares are redeemed to close an account,
the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.

-------------------------------------------------------

FUND INFORMATION

MANAGEMENT OF THE CORPORATION

BOARD OF DIRECTORS

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

INVESTMENT ADVISER

Investment decisions for the Fund are made by Federated Global Research Corp.,
the Fund's investment adviser ("Adviser"), subject to direction by the
Directors. The Adviser continually conducts investment research and supervision
for the Fund and is responsible for the purchase and sale of portfolio
instruments for which it receives an annual fee from the Fund.

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to .85% of the
Fund's average daily net assets. The fee paid by the Fund, while higher than the
advisory fee paid by other mutual funds in general, is comparable to fees paid
by other mutual funds with similar objectives and policies. Under the investment
advisory contract, which provides for voluntary waiver of the advisory fee by
the Adviser, the Adviser may waive some or all of its fee. The Adviser may
terminate this voluntary waiver at any time at its sole discretion.

ADVISER'S BACKGROUND

Federated Global Research Corp., incorporated in Delaware on May 12, 1995, is a
registered

investment adviser under the Investment Advisers Act of 1940. It is a subsidiary
of Federated Investors. All of the Class A (voting) shares of Federated
Investors are owned by a trust, the trustees of which are ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chairman and Trustee of Federated Investors, ▇▇. ▇▇▇▇▇▇▇'▇ wife, and ▇▇.
▇▇▇▇▇▇▇'▇ son, J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, who is President and Trustee of Federated
Investors. Prior to September 1995, the Adviser had not served as an investment
adviser to mutual funds.

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $76 billion invested across more than
348 funds under management and/or administration by its subsidiaries, as of
December 31, 1996, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in 1955.
Federated funds are presently at work in and through 4,500 financial
institutions nationwide.

PORTFOLIO MANAGERS

▇▇▇▇ ▇. ▇▇▇▇▇▇▇ has been the Fund's portfolio manager since its inception. ▇▇.
▇▇▇▇▇▇▇ joined Federated Investors in 1995 as a Senior Vice President of the
Fund's investment adviser. ▇▇. ▇▇▇▇▇▇▇ served as Vice President/Portfolio
Manager of international equity portfolios at ▇▇▇▇▇▇▇ and Bleichroeder, Inc.
from 1994 to 1995. He served as an Assistant Vice President/ Portfolio Manager
for international equities at the College Retirement Equities Fund from 1986 to
1994. ▇▇. ▇▇▇▇▇▇▇ is a Chartered Financial Analyst and received his M.B.A. in
finance from the University of Pennsylvania.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇ has been the Fund's portfolio manager since its inception. ▇▇.
▇▇▇▇▇ joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. ▇▇. ▇▇▇▇▇ served as a Managing Partner of Copernicus Global
Asset Management from January 1995 through October 1995. From 1990 to 1994, he
served as Senior Vice President of International Fixed Income and Foreign
Exchange for ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers. ▇▇. ▇▇▇▇▇ received his M.B.A. from Iona
College with a concentration in finance.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Ph.D. has been the Fund's portfolio manager since January
1997. ▇▇. ▇▇▇▇▇ joined Federated Investors in 1996 as an Assistant Vice
President. ▇▇. ▇▇▇▇▇ served as an International Economist and Portfolio
Strategist for ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. from 1990 to 1996. ▇▇. ▇▇▇▇▇ earned a
Ph.D. concentrating in economics from The New School for Social Research and a
▇.▇▇. from the London School of Economics.

Both the Corporation and the Investment Adviser have adopted strict codes of
ethics governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a fiduciary
duty to the Fund's shareholders and must place the interests of shareholders
ahead of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or being
considered for

purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Directors, and could
result in severe penalties.

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,

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

The distributor will pay dealers an amount equal to 5.50% of the net asset value
of Class B Shares purchased by their clients or customers. These payments will
be made directly by the distributor from its assets, and will not be made from
the assets of the Fund. Dealers may voluntarily waive receipt of all or any
portion of these payments. The distributor may pay a portion of the distribution
fee discussed below to financial institutions that waive all or any portion of
the advance payments.

DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), the distributor may be paid a fee in the amount
of 0.25% for Class A Shares and up to 0.75% for Class B Shares and Class C
Shares of the average daily net assets of each class of Shares to finance any
activity which is principally intended to result in the sale of Shares subject

to the Distribution Plan. The Fund does not currently make payments to the
distributor or charge a fee under the Distribution Plan for Class A
Shares.Shareholders of Class A Shares will be notified if the Fund intends to
charge a fee under the Distribution Plan. For Class A and Class C Shares, the
distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to provide
sales services or distribution-related support services as agents for their
clients or customers. With respect to Class B Shares, because distribution fees
to be paid by the Fund to the distributor may not exceed an annual rate of 0.75%
of Class B of Shares' average daily net assets, it will take the distributor a
number of years to recoup the expenses it has incurred for its sales services
and distribution-related support services pursuant to the Distribution Plan. The
Distribution Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Distribution Plan.

perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS

Federated Securities Corp. will pay financial institutions, at the time of
purchase of Class A Shares, an amount equal to .50% of the net asset value of
Class A Shares purchased by their clients or customers under certain qualified
plans as approved by Federated Securities Corp. (Such payments are subject to a
reclaim from the financial institution should the assets leave the program
within 12 months after purchase.) Furthermore, with respect to Class A Shares,
Class B Shares, and Class C Shares, in addition to payments made pursuant to the
Distribution Plan and Shareholder Services Agreement, Federated Securities Corp.
and Federated Shareholder Services, from their own assets, may pay financial
institutions supplemental fees for the performance of substantial sales
services, distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Adviser or its affiliates.

-------------------------------------------------------

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE DAILY NET ASSETS
FEE OF THE FEDERATED FUNDS

.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million

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

EXPENSES OF THE FUND AND CLASS A
SHARES, CLASS B SHARES AND
CLASS C SHARES

Holders of Class A Shares, Class B Shares and Class C Shares pay their allocable
portion of Corporation and portfolio expenses.

The Corporation expenses for which holders of Class A Shares, Class B Shares and
Class C Shares pay their allocable portion include, but are not limited to: the
cost of organizing the Corporation and continuing its existence; registering the
Corporation with federal and state securities authorities; Directors' fees;
auditors' fees, the cost of meetings of Directors; legal fees of the
Corporation; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.

The portfolio expenses for which holders of Class A Shares, Class B Shares and
Class C Shares pay their allocable portion include, but are not limited to:
registering the portfolio and Class A Shares, Class B Shares and Class C Shares
of the portfolio; investment advisory services; taxes and commissions; custodian
fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise from time to time.

At present, the only expenses which are allocated specifically to Class A
Shares, Class B Shares and Class C Shares as classes are expenses under the
Corporation's Distribution Plan and fees for Shareholder Services. However, the
Directors reserve the right to allocate certain other expenses to holders of
Class A Shares, Class B Shares and Class C Shares as they deem appropriate
("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Class A Shares, Class B Shares and Class C Shares;
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and to state
securities commissions; expenses related to adminstrative personnel and services
as required to support holders of Class A Shares, Class B Shares and Class C
Shares; legal fees relating solely to Class A Shares, Class B Shares and Class C
Shares; and Directors' fees incurred as a result of issues relating solely to
Class A Shares, Class B Shares and Class C Shares.

-------------------------------------------------------
SHAREHOLDER INFORMATION

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All Shares of each portfolio
or class in the Fund have equal voting rights, except that in matters affecting
only a particular portfolio or class, only Shares of that portfolio or class are
entitled to vote.

As a Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.

Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Fund's
outstanding Shares of all series entitled to vote.

As of January 2, 1997, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. (as record owner holding Class C
Shares for its clients), owned 54.32% of voting securities of the Fund's Class C
Shares, and therefore, may for certain purposes, be deemed to control the Fund
and be able to affect the outcome of certain matters presented for a vote of
shareholders.

-------------------------------------------------------
TAX INFORMATION

FEDERAL INCOME TAX

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

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the

Corporation's other portfolios, if any, will not be combined for tax purposes
with those realized by the Fund.

If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to

qualify for certain Internal Revenue Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Internal Revenue Code may limit a shareholder's ability to claim a
foreign tax credit. Furthermore, shareholders who elect to deduct their portion
of the Fund's foreign taxes rather than take the foreign tax credit must itemize
deductions on their income tax returns.

STATE AND LOCAL TAXES

Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

-------------------------------------------------------
PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for each class
of Shares.

The yield of each class of Shares is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned

by each class of Shares over a thirty day period by the maximum offering price
per share of each class on the last day of the period. This number is then
annualized using semi-annual compounding. The yield does not necessarily reflect
income actually earned by each class of Shares, and therefore, may not correlate
to the dividends or other distributions paid to shareholders.

Total return and yield will be calculated separately for Class A Shares, Class B
Shares and Class C Shares.

From time to time, advertisements for Class A Shares, Class B Shares and Class C
Shares of the Fund may refer to ratings, rankings, and other information in
certain financial publications and/or compare the performance of Class A Shares,
Class B Shares and Class C Shares to certain indices.

-------------------------------------------------------

APPENDIX

STANDARD AND POOR'S RATINGS GROUP LONG TERM DEBT RATING DEFINITIONS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's Ratings
Group. Capacity to pay interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal

and differs from the higher rated issues only in small degree.

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

CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet

timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

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

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

▇▇▇▇▇'▇ INVESTORS SERVICE, INC. LONG TERM BOND RATING DEFINITIONS

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

AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together

with the AAA group, they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not

be as large as in AAA securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in AAA securities.

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

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

interest.

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

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

FITCH INVESTORS SERVICE, INC.
LONG-TERM DEBT RATING
DEFINITIONS

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

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

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

▇▇▇▇▇'▇ INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

Leading market positions in well established industries.

High rates of return on funds employed.

Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

Broad margins in earning coverage of fixed financial charges and high internal
cash generation.

Well established access to a range of financial markets and assured sources of
alternate liquidity.

PRIME-2--Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

FITCH INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATING
DEFINITIONS

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

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

--------------------------------------------------------------------------------
ADDRESSES

Federated International High Income Fund
Class A Shares
Class B Shares
Class C Shares
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

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

INVESTMENT ADVISER
Federated Global Research Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

CUSTODIAN
State Street Bank and Trust Company
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Federated Shareholder Service Company
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇

INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇

FEDERATED INTERNATIONAL

HIGH INCOME FUND
(A PORTFOLIO OF WORLD INVESTMENT
SERIES, INC.)
CLASS A SHARES, CLASS B SHARES,
CLASS C SHARES

PROSPECTUS

A Diversified Portfolio of World
Investment Series, Inc., An
Open-End,
Management Investment Company

January 31, 1997

[LOGO OF FEDERATED INVESTORS]

Federated Investors
Federated Investors ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.

Cusip ▇▇▇▇▇▇▇▇▇
Cusip ▇▇▇▇▇▇▇▇▇

Cusip ▇▇▇▇▇▇▇▇▇
G01745-01 (1/97)

[RECYCLED PAPER LOGO]

FEDERATED INTERNATIONAL HIGH INCOME FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated International High Income Fund (the `Fund''),
a portfolio of World Investment Series, Inc. (the `Corporation'')
dated January 31, 1997. This Statement is not a prospectus. You may
request a copy of a prospectus or a paper copy of this Statement, if
you have received it electronically, free of charge by calling
1-800-341-7400.
FEDERATED INVESTORS TOWER
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Statement dated January 31, 1997

Federated Securities Corp. is the distributor of the Fund(s)
and is a subsidiary of Federated Investors.
Cusip ▇▇▇▇▇▇▇▇▇

▇▇▇▇▇▇▇▇▇
981487747
G01745-02 (1/97)

GENERAL INFORMATION ABOUT THE FUND 1

INVESTMENT OBJECTIVES AND POLICIES 1

Sovereign Debt Obligations 1
Convertible Securities 1
Warrants 1
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Futures and Options Transactions 3
Risks 6
Foreign Currency Transactions 8
Special Considerations Affecting Emerging
Markets 10
Additional Risk Considerations 11
Portfolio Turnover 11
Investment Limitations 11
WORLD INVESTMENT SERIES, INC. MANAGEMENT 13

Fund Ownership 17
Directors` Compensation 18
INVESTMENT ADVISORY SERVICES 19

Adviser to the Fund 19
Advisory Fees 19
Other Related Services 19
BROKERAGE TRANSACTIONS 19

OTHER SERVICES 20

Fund Administration 20
Custodian and Portfolio Accountant 20
Transfer Agent and Dividend Disbursing Agent 20
Independent Auditors 20
PURCHASING SHARES 20

Distribution Plan and Shareholder Services 20
Conversion to Federal Funds 21
Purchases by Sales Representatives, Directors,
and Employees of the Fund 21
DETERMINING NET ASSET VALUE 21

Determining Market Value of Securities 21
Trading in Foreign Securities 21
REDEEMING SHARES 21

Redemption in Kind 22
Elimination of the Contingent Deferred Sales
Charge 22
TAX STATUS 22

The Fund's Tax Status 22
Foreign Taxes 22
Shareholders' Tax Status 23
TOTAL RETURN 23

YIELD 23

PERFORMANCE COMPARISONS 23

Economic and Market Information 25
ABOUT FEDERATED INVESTORS 26

Mutual Fund Market 26
Institutional Clients 26
Bank Marketing 26
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 26

GENERAL INFORMATION ABOUT THE FUND

The Fund is a portfolio of World Investment Series, Inc. (the
`Corporation''), which was established under the laws of the State of
Maryland on January 25, 1994.
Shares of the Fund are offered in three classes known as Class A Shares,
Class B Shares, and Class C Shares (individually and collectively referred
to as `Shares'' as the context may require). This Statement of Additional
Information relates to all three classes of Shares of the Fund.
INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the Fund is to seek a high level of current
income. The Fund has a secondary objective of capital appreciation. The
Fund pursues its investment objectives by investing primarily in government
and corporate debt securities of issuers in emerging market countries and
developed foreign countries. The investment objectives cannot be changed
without approval of shareholders.
SOVEREIGN DEBT OBLIGATIONS
The Fund may purchase sovereign debt instruments issued or guaranteed by
foreign governments or their agencies, including debt of countries with
emerging markets or developing countries. Sovereign debt may be in the form
of conventional securities or other types of debt instruments, such as
loans or loan participations. Sovereign debt of emerging market or
developing countries may involve a high degree of risk, and may be in
default or present the risk of default. Governmental entities responsible
for repayment of the debt may be unable or unwilling to repay principal and
interest when due, and may require renegotiation or rescheduling of debt
payments. In addition, prospects for repayment of principal and interest
may depend on political as well as economic factors. The Fund may also

invest in debt obligations of supranational entities, which include
international organizations designed or supported by governmental entities
to promote economic reconstruction or development, and international
banking institutions and related government agencies. Examples of these
include, but are not limited to, the International Bank for Reconstruction
and Development (World Bank), European Investment Bank and Inter-American
Development Bank.
CONVERTIBLE SECURITIES
The convertible bonds and convertible preferred stocks in which the Fund
may invest generally retain the investment characteristics of fixed income
securities until they have been converted but also react to movements in
the underlying equity securities. The prices of fixed income securities
fluctuate inversely to the direction of interest rates. The holder is
entitled to received the fixed income of a bond or the dividend preference
of a preferred stock until the holder elects to exercise the conversion
privilege. Usable bonds are corporate bonds that can be used in whole or
in part, customarily at full face value, in lieu of cash to purchase the
issuer's common stock.
Convertible securities are senior to equity securities, and therefore have
a claim to assets of the corporation prior to the holders of common stock
in the case of liquidation. However, convertible securities are generally
subordinated to similar nonconvertible securities of the same company. The
interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality. The
Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stocks when, in the
investment adviser's opinion, the investment characteristics of the

underlying common shares will assist the Fund in achieving it investment
objective. Otherwise, the Fund will hold or trade the convertible
securities.
WARRANTS
The Fund may invest in warrants. Warrants are options to purchase common
stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than a year to twenty years or
may be perpetual. However, most warrants have expiration dates after which
they are worthless. In addition, if the market price of the common stock
does not exceed the warrant's exercise price during the life of the
warrant, the warrant will expire as worthless. Warrants have no voting
rights, pay no dividends, and have no rights with respect to the assets of
the corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the optioned common stock.

Rule 144A under the Securities Act of 1933, as amended (the `Rule''). The
Rule is a non-exclusive safe-harbor for certain secondary market
transactions involving registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule was expected to
further enhance the liquidity of the secondary market for securities
eligible for resale under the Rule. The Fund believes that the staff of
the SEC has left the question of determining the liquidity of all
restricted securities to the Directors. The Directors may consider the
following criteria in determining the liquidity of certain restricted
securities:
othe frequency of trades and quotes for the security;
othe number of dealers willing to purchase or sell the security and
the number of other potential buyers;
odealer undertakings to make a market in the security; and
othe nature of the security and the nature of the marketplace trades.
Notwithstanding the foregoing, securities of foreign issuers which are not
listed on a recognized domestic or foreign exchange or for which a bona
fide market does not exist at the time of purchase or subsequent
transaction shall be treated as illiquid securities by the Directors.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio or gain
relatively rapid, liquid, and cost-effective exposure to certain markets by
buying and selling futures contracts and options on futures contracts.
FUTURES CONTRACTS
The Fund may engage in futures contracts. A futures contract is a
firm commitment by two parties, the seller who agrees to make delivery
of the specific type of security called for in the contract ("going
short") and the buyer who agrees to take delivery of the security

("going long") at a certain time in the future. However, a securities
index futures contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last
trading day of the contract and the price at which the index was
originally written. No physical delivery of the underlying securities
in the index is made.
The purpose of the acquisition or sale of a futures contract by the
Fund is to protect the Fund from fluctuations in the value of its
securities caused by unanticipated changes in interest rates or market
conditions without necessarily buying or selling the securities. For
example, in the fixed income securities market, price generally moves
inversely to interest rates. A rise in rates generally means a drop
in price. Conversely, a drop in rates generally means a rise in
price. In order to hedge its holdings of fixed income securities
against a rise in market interest rates, the Fund could enter into
contracts to deliver securities at a predetermined price (i.e., `go
short') to protect itself against the possibility that the prices of
its fixed income securities may decline during the anticipated holding
period. The Fund would `go long'' (i.e., agree to purchase
securities in the future at a predetermined price) to hedge against a
decline in market interest rates. The Fund may also invest in
securities index futures contracts when the investment adviser
believes such investment is more efficient, liquid, or cost-effective
than investing directly in the securities underlying the index.
STOCK INDEX OPTIONS
The Fund may purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter market. A stock

index fluctuates with changes in the market values of the stocks
included in the index.
The effectiveness of purchasing stock index options will depend upon
the extent to which price movements in the Fund's portfolio correlate
with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether the Fund will
realize a gain or loss from the purchase of options on an index
depends upon movements in the level of stock prices in the stock
market generally or, in the case of certain indices, in an industry or
market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on stock
indices will be subject to the ability of the investment adviser to
predict correctly movements in the direction of the stock market
generally or of a particular industry.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed or over-the-counter put options on
financial futures contracts. The Fund would use these options only to
protect portfolio securities against decreases in value resulting from
market factors such as anticipated increase in interest rates, or when
the investment adviser believes such investment is more efficient,
liquid or cost-effective than investing directly in the futures
contract or the underlying securities or when such futures contracts
or securities are unavailable for investment upon favorable terms.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles
(but does not obligate) its purchaser to decide on or before a future

date whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an
event, the Fund will normally close out its option by selling an
identical option. If the hedge is successful, the proceeds received by
the Fund upon the sale of the second option will be large enough to
offset both the premium paid by the Fund for the original option plus
the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Fund would
then deliver the futures contract in return for payment of the strike
price. If the Fund neither closes out nor exercises an option, the
option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
The Fund may write listed or over-the counter put options on financial
futures contracts to hedge its portfolio or when the investment
adviser believes such investment is more efficient, liquid or cost-
effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are
unavailable for investment upon favorable terms. When the Fund writes
a put option on a futures contract, it receives a cash premium which
can be used in whatever way is deemed most advantageous to the Fund.
In exchange for such premium, the Fund grants to the purchaser of the
put the right to receive from the Fund, at the strike price, a short
position in such futures contract, even though the strike price upon

exercise of the option is greater than the value of the futures
position received by such holder. If the value of the underlying
futures position is not such that exercise of the option would be
profitable to the option holder, the option will generally expire
without being exercised. The Fund has no obligation to return
premiums paid to it whether or not the option is exercised. It will
generally be the policy of the Fund, in order to avoid the exercise of
an option sold by it, to cancel its obligation under the option by
entering into a closing purchase transaction, if available, unless it
is determined to be in the Fund's interest to deliver the underlying
futures position. A closing purchase transaction consists of the
purchase by the Fund of an option having the same term as the option
sold by the Fund, and has the effect of canceling the Fund's position
as a seller. The premium which the Fund will pay in executing a
closing purchase transaction may be higher than the premium received
when the option was sold, depending in large part upon the relative
price of the underlying futures position at the time of each
transaction.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options or over-the-counter call options on financial and
stock index futures contracts (including cash-settled stock index
options), to hedge its portfolio against an increase in market
interest rates, a decrease in stock prices, or when the investment
adviser believes such investment is more efficient, liquid or cost-
effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are
unavailable for investment upon favorable terms. When the Fund writes

a call option on a futures contract, it is undertaking the obligation
of assuming a short futures position (selling a futures contract) at
the fixed strike price at any time during the life of the option if
the option is exercised. As stock prices fall or market interest rates
rise and cause the price of futures to decrease, the Fund's obligation
under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position
to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the
call, so that the Fund keeps the premium received for the option. This
premium can substantially offset the drop in value of the Fund's
portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of
it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by the Fund for the
initial option. The net premium income of the Fund may then
substantially offset the realized decrease in value of the hedged
securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but
not the obligation, to enter into the underlying futures contract at a
strike price determined at the time the call was purchased, regardless
of the comparative market of such futures position at the time the
option is exercised. The holder of a call option has the right to
receive a long (or buyer's) position in the underlying futures
contract.

The Fund generally will not maintain open positions in futures
contracts it has sold or call options it has written on futures
contracts if, in the aggregate, the value of the open positions
(marked to market) exceeds the current market value of its securities
portfolio plus the unrealized loss or minus the unrealized gain on
those open positions, adjusted for the correlation between the hedged
securities and the futures contracts. If this limitation is exceeded
at any time, the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and
options positions within this limitation.
``MARGIN''IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of `initial margin'' in
cash or U.S. Treasury bills with its custodian (or the broker, if
legally permitted). The nature of initial margin in futures
transactions is different from that of margin in securities
transactions in that initial margin in futures transactions does not
involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual
obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called `variation margin,'' equal to the
daily change in value of the futures contract. This process is known
as `marking to market.'' Variation margin does not represent a

borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the
Fund will ▇▇▇▇ to market its open futures positions.
The Fund is also required to deposit and maintain margin when it
writes call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities in its
portfolio. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a
specified price during the term of the option. A call option gives the
Fund, in return for a premium, the right to buy the underlying
securities from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may write covered put and call options to generate income and
thereby protect against price movements in particular securities in
the Fund's portfolio. As the writer of a call option, the Fund has the
obligation upon exercise of the option during the option period to
deliver the underlying security upon payment of the exercise price. As
the writer of a put option, the Fund has the obligation to purchase a
security from the purchaser of the option upon the exercise of the
option.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount
of any additional consideration). In the case of put options, the Fund

will segregate cash or U.S. Treasury obligations with a value equal to
or greater than the exercise price of the underlying securities.
OVER-THE-COUNTER OPTIONS
The Fund may purchase and write over-the-counter options (`OTC
options') on portfolio securities or in securities indexes in
negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund or when the
securities indexes are not traded on an exchange.
OTC options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded
options have a continuous liquid market while OTC options may not.
RISKS
OPTIONS
Certain hedging vehicles have risks associated with them including
possible default by the other party to the transaction, illiquidity
and, to the extent the adviser's view as to certain market movements
is incorrect, the risk that the use of such hedging strategies could
result in losses greater than if they had not been used. Use of put
and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation
the Fund can realize on its investments or cause the Fund to hold a
security it might otherwise sell. The use of currency transactions
can result in the Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of

settlements, or the inability to deliver or receive a specified
currency. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between
price movements of futures contracts and price movements in the
related portfolio position of the Fund creates the possibility that
losses on the hedging instrument may be greater than gains in the
value of the Fund's position. In addition, futures and options
markets may both be liquid in all circumstances and certain over-the-
counter options may have not markets. As a result, in certain
markets, the Fund might not be able to close out a transaction without
incurring substantial losses, if at all. Although the use of futures
and options transactions for hedging should tend to minimize the risk
of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result
from an increase in value of such position. Finally, the daily
variation margin requirements for futures contracts would create a
greater ongoing potential financial risk than would purchase of
options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of hedging strategies would
reduce net asset value, and possibly income, and such losses can be
greater than if the hedging strategies had not been utilized.
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transaction (including forward currency contracts) and multiple
interest rate transactions and any combination of futures, options,
currency and interest rate transactions (`component" transactions),
instead of a single hedging strategy, as part of a single or combined

strategy when, in the opinion of the investment adviser, it is in the
best interests of the Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its
component transactions. Although combined transactions are normally
entered into based on the investment adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively
achieve the desired portfolio management goal, it is possible that the
combination will instead increase such risks or hinder achievement of
the portfolio management objective.
SWAPS, CAPS, FLOORS AND COLLARS
Among the hedging strategies into which the Fund may enter are
interest rate, currency and index swaps and the purchase or sale of
related caps, floors, and collars. The Fund expects to enter into
these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against
currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund intends to use these
transactions as ▇▇▇▇▇▇ and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or
other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or
receive interest, e.g., an exchange of floating rating payments of
fixed rate payments with respect to a notional amount of principal. A
currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash

flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to
receive payments on a notional principal amount from the party selling
such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the
party selling such floor to the extent that specified index falls
below a predetermined interest rate or amount. A collar is a
combination of a cap and a floor that preserves a certain return
within a predetermined range of interest rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments.
Inasmuch as these swaps, caps, floors, and collars are entered into
for good faith hedging purposes, the investment adviser and the Fund
believe such obligations do not constitute senior securities under the
Investment Company Act of 1940, as amended, and, accordingly, will not
treat them as being subject to its borrowing restrictions. There is
no minimal acceptable rating for a swap, cap, floor, or collar to be
purchased or held in the Fund's portfolio. If there is a default by
the counterparty, the Fund may have contractual remedies pursuant to
the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and
investment banking firms acting both as principals and agents
utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are
more recent innovations for which standardized documentation has not

yet been fully developed and, accordingly, they are less liquid than
swaps.
RISKS OF HEDGING STRATEGIES OUTSIDE THE U.S.
When conducted outside the U.S., hedging strategies may not be
regulated as rigorously as in the U.S., may not involve a clearing
mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such
positions also could be adversely affected by: (i) other complex
foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the
U.S., (iv) the imposition of different exercise and settlement terms
and procedures and the margin requirements than in the U.S., and (v)
lower trading volume and liquidity.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many hedging strategies, in addition to other requirements, require
that the Fund segregate liquid high grade assets with its custodian to
the extent Fund obligations are not otherwise "covered" through
ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the
Fund to pay or deliver securities or assets must be covered at all
times by the securities, instruments or currency required to be
delivered, or, subject to any regulatory restrictions, an amount of
cash or liquid high grade securities at least equal to the current
amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent

assets are substituted in their place or it is no longer necessary to
segregate them. For example, a call option written by the Fund will
require the Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate liquid high grade securities sufficient
to purchase and deliver the securities if the call is exercised. A
call option sold by the Fund on an index will require the Fund to own
portfolio securities which correlate with the index or to segregate
liquid high grade assets equal to the excess of the index value over
the exercise price on a current basis. A put option written by the
Fund requires the Fund to segregate liquid high grade assets equal to
the exercise price.
Except when the Fund enters into a forward contract for the purchase
or sale of a security denominated in a particular currency, a currency
contract which obligates the Fund to buy or sell currency will
generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's
obligations or to segregate liquid high grade assets equal to the
amount of the Fund's obligations.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OTC issued and exchange
listed index options, will generally provide for cash settlement. As
a result, when the Fund sells these instruments it will only segregate
an amount of assets equal to its accrued net obligations, as there is
no requirement for payment or delivery of amounts in excess of the net
amount. These amounts will equal 100% of the exercise price in the
case of a non cash-settled put, the same as an OTC guaranteed listed
option sold by the Fund, or the in-the-money amount plus any sell-back

formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when
the in-the-money amount exceeds the exercise price, the Fund will
segregate, until the option expires or is closed out, cash or cash
equivalents equal in value to such excess. OTC issued and exchange
listed options sold by the Fund other than those above generally
settle with physical delivery, and the Fund will segregate an equal
amount of assets equal to the full value of the option. OTC options
settling with physical delivery, or with an election of either
physical delivery or cash settlement will be treated the same as other
options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition
to segregating assets sufficient to meet its obligation to purchase or
provide securities or currencies, or to pay the amount owed at the
expiration of an index-based futures contract. Such assets may
consist of cash, cash equivalents, liquid debt or equity securities or
other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect
to each swap on a daily basis and will segregate an amount of cash or
liquid high grade securities having a value equal to the accrued
excess. Caps, floors and collars require segregation of assets with a
value equal to the Fund's net obligation, if any.
Strategic transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into
offsetting transactions so that its combined position, coupled with
any segregated assets, equals its net outstanding obligation in

related options and hedging strategies. For example, the Fund could
purchase a put option if the strike price of that option is the same
or higher than the strike price of a put option sold by the Fund.
Moreover, instead of segregating assets if the Fund held a futures or
forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the
price of the contract held. Other hedging strategies may also be
offset in combinations. If the offsetting transaction terminates at
the time of or after the primary transaction no segregation is
required, but if it terminates prior to such time, assets equal to any
remaining obligation would need to be segregated.
The Fund's activities involving hedging strategies may be limited by
the requirements of Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code") for qualification as a regulated investment
company. (See "Tax Status")
FOREIGN CURRENCY TRANSACTIONS
CURRENCY RISKS
The exchange rates between the U.S. dollar and foreign currencies are
a function of such factors as supply and demand in the currency
exchange markets, international balances of payments, governmental
intervention, speculation and other economic and political conditions.
Although the Fund values its assets daily in U.S. dollars, the Fund
may not convert its holdings of foreign currencies to U.S. dollars
daily. The Fund may incur conversion costs when it converts its
holdings to another currency. Foreign exchange dealers may realize a
profit on the difference between the price at which the Fund buys and
sells currencies.

The Fund will engage in foreign currency exchange transactions in
connection with its portfolio investments. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange
market or through forward contracts to purchase or sell foreign
currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
order to protect against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and a foreign
currency involved in an underlying transaction. However, forward
foreign currency exchange contracts may limit potential gains which
could result from a positive change in such currency relationships.
The investment adviser believes that it is important to have the
flexibility to enter into forward foreign currency exchange contracts
whenever it determines that it is in the Fund's best interest to do
so. The Fund will not speculate in foreign currency exchange.
The Fund will not enter into forward foreign currency exchange
contracts or maintain a net exposure in such contracts when it would
be obligated to deliver an amount of foreign currency in excess of the
value of its portfolio securities or other assets denominated in that
currency or, in the case of a "cross-hedge" denominated in a currency
or currencies that the investment adviser believes will tend to be
closely correlated with that currency with regard to price movements.
Generally, the Fund will not enter into a forward foreign currency
exchange contract with a term longer than one year.

FOREIGN CURRENCY OPTIONS
A foreign currency option provides the option buyer with the right to
buy or sell a stated amount of foreign currency at the exercise price
on a specified date or during the option period. The owner of a call
option has the right, but not the obligation, to buy the currency.
Conversely, the owner of a put option has the right, but not the
obligation, to sell the currency.
When the option is exercised, the seller (i.e., writer) of the option
is obligated to fulfill the terms of the sold option. However, either
the seller or the buyer may, in the secondary market, close its
position during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally rises in value if the underlying currency
depreciates in value. Although purchasing a foreign currency option
can protect the Fund against an adverse movement in the value of a
foreign currency, the option will not limit the movement in the value
of such currency. For example, if the Fund was holding securities
denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the
value of the currency, the Fund would not have to exercise its put
option. Likewise, if the Fund were to enter into a contract to
purchase a security denominated in foreign currency and, in
conjunction with that purchase, were to purchase a foreign currency
call option to hedge against a rise in value of the currency, and if
the value of the currency instead depreciated between the date of
purchase and the settlement date, the Fund would not have to exercise

its call. Instead, the Fund could acquire in the spot market the
amount of foreign currency needed for settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain
risks associated with foreign currency options. The markets in foreign
currency options are relatively new, and the Fund's ability to
establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not
purchase or write such options unless and until, in the opinion of the
investment adviser, the market for them has developed sufficiently to
ensure that the risks in connection with such options are not greater
than the risks in connection with the underlying currency, there can
be no assurance that a liquid secondary market will exist for a
particular option at any specific time.
In addition, options on foreign currencies are affected by all of
those factors that influence foreign exchange rates and investments
generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the
price of the option position may vary with changes in the value of
either or both currencies and may have no relationship to the
investment merits of a foreign security. Because foreign currency
transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign
currency options, investors may be disadvantaged by having to deal in
an odd lot market (generally consisting of transactions of less than

$1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of
very large transactions in the interbank market and thus may not
reflect relatively smaller transactions (i.e., less than $1 million)
where rates may be less favorable. The interbank market in foreign
currencies is a global, around-the-clock market. To the extent that
the U.S. option markets are closed while the markets for the
underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets until they reopen.
FOREIGN CURRENCY FUTURES TRANSACTIONS
By using foreign currency futures contracts and options on such
contracts, the Fund may be able to achieve many of the same objectives
as it would through the use of forward foreign currency exchange
contracts. The Fund may be able to achieve these objectives possibly
more effectively and at a lower cost by using futures transactions
instead of forward foreign currency exchange contracts.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS
Buyers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the use of futures generally. In
addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those
associated with options on currencies, as described above.

Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures
contracts is relatively new. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid
secondary market. To reduce this risk, the Fund will not purchase or
write options on foreign currency futures contracts unless and until,
in the opinion of the investment adviser, the market for such options
has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with transactions
in the underlying foreign currency futures contracts. Compared to the
purchase or sale of foreign currency futures contracts, the purchase
of call or put options on futures contracts involves less potential
risk to the Fund because the maximum amount at risk is the premium
paid for the option (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on a futures
contract would result in a loss, such as when there is no movement in
the price of the underlying currency or futures contract.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS
Investing in equity securities of companies in emerging markets may entail
greater risks than investing in equity securities in developed countries.
These risks include (i) less social, political and economic stability; (ii)
the small current size of the markets for such securities and the currently
low or nonexistent volume of trading, which result in a lack of liquidity
and in greater price volatility; (iii) certain national policies which may
restrict the Fund's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; and (v) the absence of developed structures
governing private or foreign investment or allowing for judicial redress

for injury to private property. Investing in the securities of companies in
emerging markets, may entail special risks relating to the potential
political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation by any country, the Fund could lose
its entire investment in any such country.
Settlement mechanisms in emerging markets may be less efficient and
reliable than in more developed markets. In such emerging securities
markets there may be share registration and delivery delays or failures.
Most Latin American countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates and corresponding currency
devaluations have had any may continue to have negative effects on the
economies and securities markets of certain Latin American countries.
POLITICAL, SOCIAL AND ECONOMIC RISKS. Even though opportunities for
investment may exist in emerging markets, any change in the leadership or
policies of the governments of those countries or in the leadership or
policies of any other government which exercises a significant influence
over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of Latin American countries previously
expropriated large quantities of real and personal property similar to the
property which will be represented by the securities purchased by the Fund.
The claims of property owners against those governments were never finally

settled. There can be no assurance that any property represented by
securities purchased by the Fund will not also be expropriated,
nationalized, or otherwise confiscated. If such confiscation were to occur,
the Fund could lose its entire investment in such countries. The Fund's
investments would similarly be adversely affected by exchange control
regulation in any of those countries.
Certain countries in which the Fund may invest may have groups that
advocate radical religious or revolutionary philosophies or support ethnic
independence. Any disturbance on the part of such individuals could carry
the potential for widespread destruction or confiscation of property owned
by individuals and entities foreign to such country and could cause the
loss of the Fund's investment in those countries. Instability may also
result from, among other things: (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
government through extraconstitutional means; (ii) popular unrest
associated with demands for improved political, economic and social
conditions; and (iii) hostile relations with neighboring or other
countries. Such political, social and economic instability could disrupt
the principal financial markets in which the Fund invests and adversely
affect the value of the Fund's assets.
ADDITIONAL RISK CONSIDERATIONS
The Directors consider at least annually the likelihood of the imposition
by any foreign government of exchange control restrictions which would
affect the liquidity of the Fund's assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of
foreign governments to which such assets may be exposed. The Directors
also consider the degree of risk involved through the holding of portfolio
securities in domestic and foreign securities depositories. However, in

the absence of willful misfeasance, bad faith or gross negligence on the
part of the investment adviser, any losses resulting from the holding of
the Fund's portfolio securities in foreign countries and/or with securities
depositories will be at the risk of shareholders. No assurance can be
given that the Directors' appraisal of the risks will always be correct or
that such exchange control restrictions or political acts of foreign
governments might not occur.
PORTFOLIO TURNOVER
The Fund's investment adviser does not anticipate that portfolio
turnover will result in adverse tax consequences. However, the relative
performance of the Fund's investments may make a realignment of the Fund's
portfolio desirable from time to time. The frequency of such portfolio
realignments will be determined by market conditions. Higher portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs that the Fund will bear directly. For the period from
October 2, 1996 (date of initial public investment) to November 30, 1996,
the Fund's portfolio turnover rate was 0%.
INVESTMENT LIMITATIONS
The following limitations are fundamental [except that no investment
limitation of the Fund shall prevent the Fund from investing substantially
all of its assets (except for assets which are not considered `investment
securities''under the Investment Company Act of 1940, or assets exempted
by the Securities and Exchange Commission) in an open-end investment
company with substantially the same investment objectives]:
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as are necessary for
the clearance of purchases and sales of portfolio securities. The

deposit or payment by the Fund of initial or variation margin in
connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets, including
the amount borrowed, and except to the extent that the Fund may enter
into futures contracts. The Fund will not borrow money or engage in
reverse repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while any borrowings in excess of 5% of its total assets
are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. For purposes of this limitation, the
following will not be deemed to be pledges of the Fund's assets: (a)
the deposit of assets in escrow in connection with the writing of
covered put or call options and the purchase of securities on a when-
issued basis; and (b) collateral arrangements with respect to: (i)
the purchase and sale of securities options (and options on securities
indexes) and (ii) initial or variation margin for futures contracts.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets
in any one industry, except that the Fund may invest 25% or more of

the value of its total assets in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities.
INVESTING IN COMMODITIES
The Fund will not invest in commodities, except that the Fund reserves
the right to engage in transactions involving futures contracts,
options, and forward contracts with respect to securities, securities
indexes or currencies.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the securities of
companies whose business involves the purchase or sale of real estate
or in securities which are secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities.
This shall not prevent the Fund from purchasing or holding U.S.
government obligations, corporate bonds, money market instruments,
debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by the Fund's investment objective,
policies, and limitations or the Corporation's Articles of
Incorporation.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.

DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items, or securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result, more
than 5% of the value of its total assets would be invested in the
securities of that issuer, and will not acquire more than 10% of the
outstanding voting securities of any one issuer.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval [except that no investment
limitation of the Fund shall prevent the Fund from investing substantially
all of its assets (except for assets which are not considered `investment
securities''under the Investment Company Act of 1940, or assets exempted
by the Securities and Exchange Commission) in an open-end investment
company with substantially the same investment objectives]. Shareholders
will be notified before any material changes in these limitations become
effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, invest no more than 5% of its total assets in any one
investment company, and invest no more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
investment companies only in open-market transactions involving only
customary broker's commissions. However, these limitations are not

applicable if the securities are acquired in a merger, consolidation,
or acquisition of assets.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable time
deposits with maturities over seven days, over-the-counter options,
swap agreements not determined to be liquid, and certain restricted
securities not determined by the Directors to be liquid.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities or futures
contracts, unless the securities or futures contracts are held in the
Fund's portfolio or unless the Fund is entitled to them in deliverable
form without further payment or after segregating cash in the amount
of any further payment.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the
securities or futures contracts are held in the Fund's portfolio or
unless the Fund is entitled to them in deliverable form without
further payment or after segregating cash in the amount of any further
payment.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.

The Fund has no present intent to borrow money, pledge securities, or
invest in reverse repurchase agreements in excess of 5% of the value of its
total assets in the coming fiscal year. In addition, the Fund expects to
lend not more than 5% of its total assets in the coming fiscal year.

For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment to be
`cash items.''
WORLD INVESTMENT SERIES, INC. MANAGEMENT

Officers and Directors are listed with their addresses, birthdates, present
positions with World Investment Series, Inc., and principal occupations.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇

▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: February 3, 1934
Director
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee,
University of Pittsburgh; Director or Trustee of the Funds.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: July 4, 1918

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

▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ *
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923
Director and President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.@
Miller, Ament, Henny & Kochuba
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: June 18, 1924
Director
Attorney of Counsel, Miller, Ament, Henny & ▇▇▇▇▇▇▇; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Miller, Ament, Henny & Kochuba
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: October 6, 1926
Director
Attorney, Member of Miller, Ament, Henny & ▇▇▇▇▇▇▇; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, Federal Emergency Management Advisory Board and Czech
Management Center; Director or Trustee of the Funds.

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇
Birthdate: June 21, 1935
Director
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, ▇▇▇▇▇ Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director or
Trustee of the Funds.

Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. ▇▇. ▇▇▇▇▇▇▇ is the son of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Director and
Chairman of the Company.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.

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

* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board between meetings of
the Board.
As used in the table above, `The Funds'' and ``Funds'' mean the
following investment companies: 111 ▇▇▇▇▇▇▇▇ Funds; Arrow Funds; Automated
Government Money Trust; ▇▇▇▇▇▇▇▇▇ Funds; ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Metals Fund,
Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor Series;
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Daily Passport Cash Trust; Federated Adjustable Rate
U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Insurance Series; Federated
Investment Portfolios; Federated Investment Trust; Federated Master Trust;
Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated
Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust;

Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds;
RIMCO Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
The Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus
Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding Shares.

As of January 2, 1997, the following shareholders of record owned 5% or
more of the outstanding Class A Shares of the Fund: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Colts Neck, New Jersey, owned approximately 25,797
Shares (23.93%; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Pittsburgh,
Pennsylvania, owned approximately 5,471 Shares (5.08%); The Ballyferriter
Trust, Pittsburgh, Pennsylvania, owned approximately 18,426 Shares
(17.09%); The ▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ Charitable Remainder Trust, Pittsburgh,
Pennsylvania, owned approximately 9,811 Shares (9.10%; and ▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇ Gellers, Plantation, Florida, owned approximately 9,144
Shares (8.48%).

As of January 2, 1997, the following shareholders of record owned 5% or
more of the outstanding Class C Shares of the Fund: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇, for the sole benefit of its customers, Jacksonville,
Florida, owned approximately 2,196 Shares (13.57%); ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co.,
Maryland Heights, Missouri, owned approximately 8,787 Shares (54.32%);
Lewco Securities Corp., Jersey City, New Jersey, owned approximately 3,019
Shares (18.66%); and ▇▇▇▇ ▇▇▇▇▇▇▇, Yonkers, New York, owned approximately
1,996 Shares (12.34%).

DIRECTORS` COMPENSATION

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

▇▇▇▇ ▇. ▇▇▇▇▇▇▇ $ 0 $0 for the Corporation and
Chairman and Director 56 other investment companies in
the Fund Complex

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $ 1,018.27 $108,725 for the Corporation and
Director 56other investment companies in the
Fund Complex

▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. $ 1,120.27 $119,615 for the Corporation and
Director 56other investment companies in the
Fund Complex

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $ 1,120.27 $119,615 for the Corporation and
Director 56 other investment companies in
the Fund Complex

▇▇▇▇▇ ▇. ▇▇▇▇ $ 1,120.27 $119,615 for the Corporation and
Director 56 other investment companies in
the Fund Complex

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D. $ 1,018.27 $108,725 for the
Corporation and
Director 56 other investment companies in
the Fund Complex

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $ 0 $0 for the Corporation and
President and Director 6 other investment companies in the
Fund Complex

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. $ 1,120.27 $119,615 for the
Corporation and
Director 56 other investment companies in
the Fund Complex

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $ 1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in
the Fund Complex

▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $ 1,018.27 $108,725 for the Corporation and

Director 56 other investment companies in
the Fund Complex

▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. $ 1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in
the Fund Complex

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $ 1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in
the Fund Complex

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ $ 1,018.27 $108,725 for the Corporation and
Director 56 other investment companies in
the Fund Complex

*Information is furnished for the fiscal year ended November 30, 1996.
#The aggregate compensation is provided for the Corporation which was
comprised of 7 portfolios, as of
November 30, 1996.
+The information is provided for the last calendar year end.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Global Research Corp. (the
"Adviser"). It is a subsidiary of Federated Investors. All the voting

securities of Federated Investors are owned by a trust, the trustees of
which are ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, his wife, and his son, J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
The Adviser shall not be liable to the Corporation, the Fund, or any
shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or omitted
by it, except acts or omissions involving willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties imposed upon it by
its contract with the Corporation.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in each prospectus.
For the period from October 2, 1996 (date of initial public investment)
to November 30, 1996, the Adviser earned $7,908, all of which was
voluntarily waived.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order to
facilitate the purchase of shares of funds offered by Federated Securities
Corp.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Directors.

The adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the Fund or
to the adviser and may include: advice as to the advisability of investing
in securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. For the period from October 2, 1996 (date of initial public
investment) to November 30, 1996, the Fund paid $202 in brokerage
commissions.
Research services provided by brokers and dealers may be used by the
adviser or by affiliates in advising the Fund and other accounts. To the
extent that receipt of these services may supplant services for which the
adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from October 2, 1996 (date of
initial public investment) to November 30, 1996, Federated Services Company
earned $30,328.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, Massachusetts, is custodian
for the securities and cash of the Fund. Federated Services Company,
Pittsburgh, Pennsylvania, provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments. The fee paid
for this service is based upon the level of the Fund's average net assets
for the period plus out-of-pocket expenses.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based upon the
size, type and number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
PURCHASING SHARES

Except under certain circumstances described in each prospectus, Shares are
sold at their net asset value (plus a sales load on Class A Shares only) on
days the New York Stock Exchange is open for business. The procedure for

purchasing Shares is explained in each prospectus under "How To Purchase
Shares."
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services as appropriate, to
stimulate distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to, marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Directors expect that the Class A
Shares, Class B Shares, and Class C Shares of the Fund will be able to
achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objectives. By identifying
potential investors whose needs are served by the Fund's objectives, and
properly servicing these accounts, it may be possible to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; (3)
enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.

For the period from October 2, 1996 (date of initial public investment)
to November 30, 1996, the Fund's Class B Shares and Class C Shares paid
$1,599 and $54, respectively, in distribution services fees, none of which
were voluntarily waived. Class A Shares have no present intention of paying
or accruing distribution services fees during the fiscal year ending
November 30, 1997. In addition, for the period from October 2, 1996 (date
of initial public investment) to November 30, 1996, the Fund's Class A
Shares, Class B Shares and Class C Shares paid shareholder services fees in
the amount of $1,775, $533 and $18, respectively, none of which were
voluntarily waived.

CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds before shareholders
begin to earn dividends. Federated Services Company acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
PURCHASES BY SALES REPRESENTATIVES, DIRECTORS, AND EMPLOYEES OF THE FUND
Directors, employees, and sales representatives of the Fund, Federated
Global Research Corp., and Federated Securities Corp. or their affiliates,
or any investment dealer who has a sales agreement with Federated
Securities Corp. and their spouses and children under 21, may buy Class A
Shares at net asset value without a sales load. Shares may also be sold
without a sales load to trusts or pension or profit-sharing plans for these
people.

These sales are made with the purchaser's written assurance that the
purchase is for investment purposes and that the securities will not be
resold except through redemption by the Fund.
DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have
passed, are recorded as soon as the Fund is informed of the ex-dividend
date.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities, other than options, are
determined as follows:
oaccording to the prices provided by an independent pricing service
if available, or at fair value as determined in good faith by the
Directors; or
ofor short-term obligations with remaining maturities of 60 days or
less at the time of purchase, at amortized cost, unless the
Directors determine that particular circumstances of the security
indicate otherwise.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data.
The Fund will value futures contracts and options at their market values
established by the exchanges on which they are traded at the close of
trading on such exchanges unless the Directors determine in good faith that
another method of valuing such investments is necessary.

TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value,
the Fund values foreign securities at the latest closing price on the
exchange on which they are traded immediately prior to the closing of the
New York Stock Exchange. Certain foreign currency exchange rates may also
be determined at the latest rate prior to the closing of the New York Stock
Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at current rates. Occasionally, events that affect these
values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If such events
materially affect the value of portfolio securities, these securities may
be valued at their fair value as determined in good faith by the Directors,
although the actual calculation may be done by others.
REDEEMING SHARES

The Fund redeems Shares at the next computed net asset value, less any
applicable contingent deferred sales charge, after the Fund receives the
redemption request. Redemption procedures are explained in each prospectus
under "How To Redeem Shares." Although the transfer agent does not charge
for telephone redemptions, it reserves the right to charge a fee for the
cost of wire-transferred redemptions of less than $5,000.
Class B Shares redeemed within six years of purchase and Class C Shares and
applicable Class A Shares redeemed within one year of purchase may be
subject to a contingent deferred sales charge. The amount of the contingent
deferred sales charge is based upon the amount of the administrative fee
paid at the time of purchase by the distributor to the financial
institution for services rendered, and the length of time the investor
remains a shareholder in the Fund. Should financial institutions elect to

receive an amount less than the administrative fee that is stated in the
prospectus for servicing a particular shareholder, the contingent deferred
sales charge and/or holding period for that particular shareholder will be
reduced accordingly.
Since portfolio securities of the Fund may be traded on foreign exchanges
which trade on Saturdays or on holidays on which the Fund will not make
redemptions, the net asset value of each class of Shares of the Fund may be
significantly affected on days when shareholders do not have an opportunity
to redeem their Shares.
REDEMPTION IN KIND
Although the Corporation intends to redeem Shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole or
in part by a distribution of securities from the respective Fund's
portfolio. To the extent available, such securities will be readily
marketable.
The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, as amended, under which the Corporation is obligated
to redeem Shares for any one shareholder in cash only up to the lesser of
$250,000 or 1% of the respective class's net asset value during any 90-day
period.
Any redemption beyond this amount will also be in cash unless the Directors
determine that payment should be in kind. In such a case, the Fund will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way as the Fund determines net asset value.
The portfolio instruments will be selected in a manner that the Directors
deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them

before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amounts that a shareholder may withdraw under a Systematic Withdrawal
Program that qualify for elimination of the Contingent Deferred Sales
Charge may not exceed 12% annually with reference initially to the value of
the Class B Shares upon establishment of the Systematic Withdrawal Program
and then as calculated at the annual valuation date. Redemptions on a
qualifying Systematic Withdrawal Program can be made at a rate of 1.00%
monthly, 3.00% quarterly, or 6.00% semi-annually with reference to the
applicable account valuation amount. Amounts that exceed the 12.00% annual
limit for redemption, as described, may be subject to the Contingent
Deferred Sales Charge. To the extent that a shareholder exchanges Shares
for Class B Shares of other Federated Funds, the time for which the
exchanged-for Shares are to be held will be added to the time for which
exchanged-from Shares were held for purposes of satisfying the 12 month
holding requirement. However, for purposes of meeting the $10,000 minimum
account value requirement, Class B Share accounts will not be aggregated.
TAX STATUS

THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. To qualify for this
treatment, the Fund must, among other requirements:
oderive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;

oderive less than 30% of its gross income from the sale of securities
held less than three months;
oinvest in securities within certain statutory limits; and
odistribute to its shareholders at least 90% of its net income earned
during the year.
FOREIGN TAXES
Investment income on certain foreign securities in which the Fund may
invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United
States and foreign countries, however, may reduce or eliminate the amount
of foreign taxes to which the Fund would be subject.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional Shares. The Fund's dividends, and any
short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have
held the Fund Shares.
TOTAL RETURN

The Fund's cumulative total returns for Class A Shares, Class B Shares,
and Class C Shares, for the period from October 2, 1996 (date of initial
public investment) to November 30, 1996, were (1.63%), (2.67%), and 1.86%,
respectively. Cumulative total return reflects the Fund's total performance
over a specified period of time. This total return assumes and is reduced
by the payment of the maximum sales charge. The Fund's total return for
Class A Shares, Class B Shares, and Class C Shares is reflective of only 2

months of Fund activity since the Fund's date of initial public
investment.
The average annual total return for each class of Shares of the Fund is the
average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that
investment. The ending redeemable value is computed by multiplying the
number of Shares owned at the end of the period by the net asset value per
share at the end of the period. The number of Shares owned at the end of
the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales load, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Any applicable contingent deferred sales charge is deducted from the ending
value of the investment based on the lesser of the original purchase price
or the net asset value of Shares redeemed.
YIELD

The yields for Class A Shares, Class B Shares, and Class C Shares for
the 30-day period ended November 30, 1996 were 9.66%, 9.41%, and 9.38%,
respectively.
The yield for each class of Shares of the Fund is determined by dividing
the net investment income per share (as defined by the Securities and
Exchange Commission) earned by any class of Shares over a thirty-day period
by the maximum offering price per share of the respective class on the last
day of the period. This value is annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a 12-month period and is
reinvested every six months. The yield does not necessarily reflect income
actually earned by the Fund because of certain adjustments required by the

Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to the shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any
class of Shares, the performance will be reduced for those shareholders
paying those fees.
PERFORMANCE COMPARISONS

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

Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specified period of time. From time to
time, the Fund will quote its Lipper ranking in the "emerging market
region funds" category in advertising and sales literature.
MORNINGSTAR, INC. , an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
▇.▇. ▇▇▇▇▇▇ NON-DOLLAR BOND INDEX, is a total return, unmanaged
trade-weighted index of over 360 government and high-grade bonds in
12 developed countries. Investments cannot be made in an index.
▇.▇. ▇▇▇▇▇▇ EMERGING MARKET BOND INDEX, tracks total returns of
external currency denominated debt instruments of the emerging
markets: ▇▇▇▇▇ ▇▇▇▇▇, Loans, Eurobonds, and U.S. Dollar denominated
local market instruments. The index is comprised of 14 emerging
market countries.
▇.▇. ▇▇▇▇▇▇ GLOBAL (EX-U.S.) GOVERNMENT INDEX, is the standard
unmanaged foreign securities index representing major government
bond markets.
▇▇▇▇▇▇ BROTHERS HIGH YIELD INDEX covers the universe of fixed
rate, publicly issued, noninvestment grade debt registered with the
SEC. All bonds included in the High Yield Index must be dollar-
denominated and nonconvertible and have at least one year remaining
to maturity and an outstanding par value of at least $100 million.
Generally securities must be rated Ba1 or lower by Moodys Investors
Service, including defaulted issues. If no Moodys rating is

available, bonds must be rated BB+ or lower by S&P; and if no S&P
rating is available, bonds must be rated below investment grade by
Fitch Investor's Service. A small number of unrated bonds is
included in the index; to be eligible they must have previously held
a high yield rating or have been associated with a high yield
issuer, and must trade accordingly.
VALUE LINE MUTUAL FUND SURVEY, published by Value Line Publishing,
Inc., analyzes price, yield, risk, and total return for equity and
fixed income mutual funds. The highest rating is One, and ratings
are effective for one month.
STRATEGIC INSIGHT MUTUAL FUND RESEARCH AND CONSULTING, ranks funds
in various fund categories by making comparative calculations using
total return. Total return assumes the reinvestment of all capital
gains distributions and income dividends and takes into account any
change in net asset value over a specified period of time.
VALUE LINE COMPOSITE INDEX, consists of approximately 1,700 common
equity securities. It is based on a geometric average of relative
price changes of the component stocks and does not include income.
FINANCIAL PUBLICATIONS: The Wall Street Journal, Business Week,
Changing Times, Financial World, Forbes, Fortune and Money
magazines, among others--provide performance statistics over
specified time periods.
Various publications and annual reports produced by the World Bank
and its affiliates.
Various publications from the International Bank for Reconstruction
and Development.

Various publications including, but not limited to, ratings agencies
such as ▇▇▇▇▇'▇ Investors Service, Inc., Fitch Investors Service,
Inc., and Standard & Poor's Ratings Group.
Various publications from the Organization for Economic Cooperation
and Development (OECD).
From time to time, the Fund may quote information including but not limited
to data regarding: individual countries, regions, world stock exchanges,
and economic and demographic statistics from sources deemed reliable.
Advertisements and other sales literature for any class of Shares may quote
total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an
investment in any class of Shares based on annual reinvestment of
dividends over a specified period of time. Advertisements may quote
performance information which does not reflect the effect of the sales
charge on Class A Shares.
From time to time as it deems appropriate, the Fund may advertise the
performance of any class of Shares using charts, graphs, and descriptions,
compared to federally insured bank products including certificates of
deposit and time deposits and to money market funds using the Lipper
Analytical Services money market instruments average. In addition,
advertising and sales literature for the Fund may use charts and graphs to
illustrate the principles of dollar-cost averaging and may disclose the
amount of dividends paid by the Fund over certain periods of time.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in

which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Fund. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute.

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors. These traders
handle trillions of dollars in annual trading volume.
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Executive Vice President, oversees Federated's equity
and high yield corporate bond management while ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive
Vice President, oversees Federated's domestic fixed income management.

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Executive Vice President, oversees the management of
Federated's global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients
is headed by ▇▇▇▇ ▇. ▇▇▇▇▇▇, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial

professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by ▇▇▇▇▇ ▇. ▇▇▇▇, President,Federated Securities Corp..
*source: Investment Company Institute

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:

(a)Financial Statements: 1a-d, ▇▇-▇, ▇▇-▇,▇▇-▇, ▇▇-▇, ▇▇-▇, and
7a-c. The Financial Statements for the fiscal year ended
November 30, 1996, are hereby incorporated herein by reference
from the Funds' Annual Reports dated November 30, 1996.
(b) Exhibits:
(1) (i) Conformed Copy of Articles of Incorporation of
the Registrant;(1)
(ii) Conformed Copy of Articles Supplementary;(5)
(2) Copy of By-Laws of the Registrant; (1)
(3) Not applicable;
(4) (i) Copies of Specimen Certificates for Shares of
Capital Stock of Federated World Utility Fund;

Federated Asia Pacific Growth Fund, Federated
Emerging Markets Fund, Federated European Growth
Fund, Federated International Small Company Fund,
and Federated Latin American Growth Fund; (7)
(ii) Copies of Specimen Certificates for Shares of
Capital Stock of Federated International High
Income Fund Class A Shares, Class B Shares, and
Class C Shares; +
(5) (i) Conformed Copy of Investment Advisory Contract of
the Registrant through and including Exhibit
F;(5)
(ii) Conformed Copy of Assignment of Investment
Advisory Contract;(5)
(iii)Conformed Copy of Exhibit G to the Investment
Advisory Contract of the Registrant; +
(6) (i) Conformed Copy of Distributor's Contract of the
Registrant through and including Exhibit S;(5)
(ii) Conformed Copy of Exhibits T, U, and V to the
Distributor's Contract of the Registrant; +
(iii)The Registrant hereby incorporates the conformed
copy of the Specimen Mutual Funds Sales and
Service Agreement; Mutual Funds Service
Agreement; and Plan Trustee/Mutual Funds Service
Agreement from Item 24(b)6 of the Cash Trust
Series II Registration Statement on Form N-1A,
filed with the Commission on July 24, 1995. (File
Nos. 33-38550 and 811-6269)
(7) Not applicable;

+All exhibits have been filed electronically.

1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed February 4, 1994. (File Nos.
33-52149 and 811-7141).
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed January 26, 1996 (File Nos. 33-52149
and 811-7141).
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed July 31, 1996 (File Nos. 33-52149
and 811-7141).

(8) Conformed copy of Custodian Agreement of the
Registrant; (3)
(9) (i) Conformed copy of Agreement for Fund Accounting
Services, Administrative Services, Transfer
Agency Services, and Custody Services
Procurement (7);
(ii) The responses described in Item 24(b)6 are
hereby incorporated by reference.
(iii)..........On behalf of Federated World Utility
Fund, the .....Registrant hereby incorporates the
conformed .....copy of the Shareholder Services Sub-
Contract ......between Fidelity and Federated
Shareholder ...Services from Item 24(b)(9)(iii) of the

Federated GNMA Trust Registration Statement on
Form N-1A, filed with the Commission of March
25, 1996. (File nos. 2-75670 and 811-3375);
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered; (2)
(11) Conformed Copy of Independent Auditors Consent; +
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding; (2)
(14) Not applicable;
(15) (i) Conformed Copy of Rule 12b-1 Distribution Plan
through and including Exhibit R;(5)
(ii) Conformed Copy of Exhibits S, T, and U to the Rule
12b-1 Distribution Plan of the Registrant; +
(16) Copy of Schedule for Computation of Fund Performance
Data for World Utility Fund; (3)
(i) Copy of Schedule for Computation of Fund
Performance Data for Federated Asia Pacific Growth
Fund, Federated Emerging Market Fund, Federated
European Growth Fund, Federated Small Company
Fund, Federated Latin American Growth Fund; (7)
(ii) Copy of Schedule for Computation of Fund
Performance Data for Federated International High
Income Fund; +
(17) Copy of Financial Data Schedules; +
(18) Conformed Copy of Multiple Class Plan; (5)
(19) Conformed copy of Power of Attorney; +

+All exhibits have been filed electronically.

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed March 24, 1994. (File Nos. 33-52149
and 811-7141).
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed July 25, 1994 (File Nos. 33-52149
and 811-7141).
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed January 26, 1996 (File Nos. 33-52149
and 811-7141).
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed July 31, 1996 (File Nos. 33-52149
and 811-7141).

Item 25. Persons Controlled by or Under Common Control with Registrant.

None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of December 31, 1996

Shares of capital stock
($0.001 per Share par value)

Federated World Utility Fund
a) Class A Shares 1,364
b) Class B Shares 711
c) Class C Shares 382
d) Class F Shares 421

Federated Asia Pacific Growth Fund
a) Class A Shares 1,286
b) Class B Shares 1,345
c) Class C Shares 1,045

Federated Emerging Markets Fund
a) Class A Shares 2,468
b) Class B Shares 1,484
c) Class C Shares 1,044

Federated European Growth Fund
a) Class A Shares 1,219
b) Class B Shares 1,144
c) Class C Shares 1,029

Federated International Small Company Fund
a) Class A Shares 1,908
b) Class B Shares 2,525
c) Class C Shares 1,253

Federated Latin American Growth Fund
a) Class A Shares 1,200

b) Class B Shares 1,185
c) Class C Shares 1,040

Federated International High Income Fund:

a) Class A Shares 1,064
b) Class B Shares 1,396
c) Class C Shares 1,010

Item 27. Indemnification (1).

Item 28. Business and Other Connections of Investment Adviser:

For a description of the other business of the Investment
Adviser, see the section entitled "Management of the Corporation"
in Part A. The affiliations with the Registrant of three of the
Directors and two of the Officers of the Investment Adviser are
included in Part B of the Registration Statement under "World
Investment Series, Inc. Management."

The remaining Officers of the Investment Adviser are: J.
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President, CEO and COO; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
III, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇ ▇▇▇▇▇▇, and ▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice Presidents; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, J. ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇, and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice Presidents; J.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇.

▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇-Malus, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice Presidents; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Treasurer, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Secretary. The business address
of each of the Officers of the Federated Research Division of
Federated Global Research Corp. is Federated ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ or ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇-▇▇▇▇, as applicable. These individuals are also officers
of a majority of the investment advisers to the Funds listed in
Part B of this Registration Statement.

Item 29. Principal Underwriters:

(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: 111 ▇▇▇▇▇▇▇▇ Funds; Arrow Funds;
Automated Government Money Trust; ▇▇▇▇▇▇▇▇▇ Funds; ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Metals Fund, Inc.; Cash Trust Series II; Cash Trust
Series, Inc. ; DG Investor Series; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government
Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs
Fund; Federated Equity Funds; Federated Equity Income Fund, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated

GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund,
Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated
Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term
U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated
U.S. Government Securities Fund: 2-5 Years; Federated U.S.
Government Securities Fund: 5-10 Years; Federated Utility Fund,
Inc.; First Priority Funds; Fixed Income Securities, Inc.; High
Yield Cash Trust; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government
Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Money Market Management, Inc.; Money Market Obligations Trust;
Money Market Trust; Municipal Securities Income Trust; Newpoint
Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The
Starburst Funds; The Starburst Funds II; The Virtus Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves;
Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.

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

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Director, Asst. Secretary, --
Federated Investors Tower Asst. Treasurer, Federated
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Securities Corp.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Director, Chairman, Chief Director and
Federated Investors Tower Executive Officer, ChiefPresident
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated President
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Securities Corp.

▇▇▇▇ ▇. ▇▇▇▇▇▇ President-Institutional Sales, --

Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇ President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Securities Corp.

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Senior Vice President, --

Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇▇▇▇▇ ▇. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇▇▇▇▇ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.

▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.

▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

H. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

(1) (2) (3)

Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇ ▇. ▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

Miles ▇. ▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Assistant Vice President, --

Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇ ▇▇▇▇▇▇▇ Treasurer, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

(c)Not applicable.

Item 30. Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant Federated Investors Tower
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

Federated Shareholder Services Company ▇.▇. ▇▇▇ ▇▇▇▇
(Transfer Agent, Dividend ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Disbursing Agent and Portfolio
Recordkeeper)

Federated Services Company Federated Investors Tower
(Administrator) ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

Federated Global Research Corp. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
(▇▇▇▇▇▇▇) ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

State Street Bank and Trust Company ▇.▇. ▇▇▇ ▇▇▇▇
(▇▇▇▇▇▇▇▇▇) ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇

Item 31. Not applicable.

Item 32. Undertakings:

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, WORLD INVESTMENT SERIES,
INC., certifies that it meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 29th day of January, 1997.

WORLD INVESTMENT SERIES, INC.

BY: /s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Assistant Secretary
Attorney in Fact for ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
January 29, 1997

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:

NAME TITLE DATE

By:/s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Attorney In Fact January 29, 1997
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇ For the Persons

ASSISTANT SECRETARY Listed Below

NAME TITLE

▇▇▇▇ ▇. ▇▇▇▇▇▇▇* Chairman and Director
(Chief Executive Officer)

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇* President and Director

▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇* Treasurer, Executive Vice
President and Secretary
(Principal Financial and
Accounting Officer)

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇* Director
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.* Director
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇* Director
▇▇▇▇▇ ▇. ▇▇▇▇* Director
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.* Director
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.* Director
▇▇▇▇▇ ▇. ▇▇▇▇▇▇* Director
▇▇▇▇▇▇ ▇. ▇▇▇▇▇* Director
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.* Director
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇* Director
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇* Director

* By Power of Attorney

FEDERATED LATIN AMERICAN GROWTH FUND CLASS A SHARES SHAREHOLDER TRANSACTION EXPENSES

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