INTERNATIONAL SERIES INC, 497, 1996-02-02

INTERNATIONAL SERIES INC
497, 1996-02-02

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FEDERATED INTERNATIONAL INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)
(A PORTFOLIO OF INTERNATIONAL SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

PROSPECTUS

The shares of Federated International Income Fund (the "Fund") represent
interests in a non-diversified investment portfolio of International Series,
Inc., (formerly, FT Series, Inc.) (the "Corporation"), an open-end, management
investment company (a mutual fund). The Fund invests primarily in high-quality
debt securities denominated primarily in foreign currencies to seek a high
level of current income in U.S. Dollars consistent with prudent investment
risk. The Fund has a secondary objective of capital appreciation.

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,
1996, with the Securities and Exchange Commission. 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 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.

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

Prospectus dated January 31, 1996

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TABLE OF CONTENTS

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

Financial Highlights...........................................................4
General Information............................................................7

Investment Information.........................................................8
Investment Objective.........................................................8
Investment Policies..........................................................8

Investment Limitations......................................................16

Net Asset Value...............................................................17

Investing in the Fund.........................................................17

How to Purchase Shares........................................................18
Investing in Class A Shares.................................................18
Subaccounting Services......................................................19
Investing in Class B Shares.................................................21
Investing in Class C Shares.................................................22

Special Purchase Features...................................................23

Exchange Privilege............................................................23

How to Redeem Shares..........................................................25
Special Redemption Features.................................................26
Contingent Deferred Sales Charge............................................27

Elimination of Contingent Deferred Sales
Charge...................................................................28

Account and Share Information.................................................29

International Series, Inc.

Information.................................................................30

Management of the Corporation...............................................30
Distribution to Shares......................................................31
Administration of the Fund..................................................32

Shareholder Information.......................................................33
Voting Rights...............................................................33

Tax Information...............................................................33
Federal Income Tax..........................................................33
State and Local Taxes.......................................................34

Performance Information.......................................................34

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

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ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (2)............................................................................. 0.65%
12b-1 Fee (after waiver) (3).................................................................................. 0.08%
Total Other Expenses.......................................................................................... 0.57%
Shareholder Services Fee (after waiver) (4).................................................... 0.12%
Total Operating Expenses (5)......................................................................... 1.30%
</TABLE>

(1) Class A Shares purchased with the proceeds of a redemption of shares of an
unaffiliated investment company purchased or redeemed with a sales load and
not distributed by Federated Securities Corp. may be charged a contingent
deferred sales charge of 0.50 of 1.00% for redemptions made within one year
of purchase. (See "Contingent Deferred Sales Charge").

(2) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.

(3) The maximum 12b-1 fee is 0.25%.

(4) The maximum shareholder services fee is 0.25%.

(5) The total operating expenses would have been 1.70% absent the voluntary
waivers of portions of the management fee, the 12b-1 fee and the
shareholder services fee.

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.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period....................................................................... $63 $84 $113 $195
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $58 $84 $113 $195
</TABLE>

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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SUMMARY OF FUND EXPENSES
FEDERATED INTERNATIONAL INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)
<TABLE>
<S> <C> <C>
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)............................................................................. 0.65%
12b-1 Fee..................................................................................................... 0.75%
Total Other Expenses.......................................................................................... 0.70%
Shareholder Services Fee....................................................................... 0.25%
Total Operating Expenses (3)(4)...................................................................... 2.10%
</TABLE>

(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 2.20% absent the voluntary
waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class B Shares" and "International Series,
Inc. 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.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period....................................................................... $78 $109 $136 $243
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $21 $66 $113 $243
</TABLE>

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 INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)
<TABLE>
<S> <C> <C>
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).............................................................................. 0.65%
12b-1 Fee...................................................................................................... 0.75%
Total Other Expenses........................................................................................... 0.65%
Shareholder Services Fee (after waiver) (3)..................................................... 0.20%
Total Operating Expenses (4).......................................................................... 2.05%
</TABLE>

(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. For a more complete description, see
"Contingent Deferred Sales Charge".

(3) The maximum shareholder services fee is 0.25%

(4) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1996. The total
operating expenses were 2.06% for the fiscal year ended November 30, 1995
and would have been 2.20% absent the voluntary waivers of portions of the
management fee and the shareholder services fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class C Shares" and "International Series,
Inc. 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.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period....................................................................... $31 $64 $110 $238
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $21 $64 $110 $238
</TABLE>

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 INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated January 12, 1996, on the
Fund's financial statements for the year ended November 30, 1995, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free from charge.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1995 1994 1993 1992
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.52 $ 11.86 $ 10.47 $ 10.84
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------
Net investment income 0.79 0.70 0.88 0.62
- ----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 0.84 (0.76) 1.40 (0.20)
- ---------------------------------------------------------------------------- --------- --------- --------- ---------
Total from investment operations 1.63 (0.06) 2.28 0.42
- ----------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------
Distributions from net investment income (0.77) (0.63) (0.75) (0.71)
- ----------------------------------------------------------------------------
Distributions in excess of net investment income (b) -- -- -- (0.05)
- ----------------------------------------------------------------------------
Distributions from net realized gain on investments and foreign currency
transactions -- (0.65) (0.14) (0.03)
- ---------------------------------------------------------------------------- --------- --------- --------- ---------
Total distributions (0.77) (1.28) (0.89) (0.79)
- ---------------------------------------------------------------------------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 11.38 $ 10.52 $ 11.86 $ 10.47
- ---------------------------------------------------------------------------- --------- --------- --------- ---------
TOTAL RETURN (C) 16.12% (0.84%) 22.95% 3.82%
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------
Expenses 1.30% 1.30% 1.25% 0.99%
- ----------------------------------------------------------------------------
Net investment income 6.79% 6.67% 7.71% 5.83%
- ----------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.40% 0.20% 0.27% 0.62%
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $173,905 $209,008 $220,602 $86,937
- ----------------------------------------------------------------------------
Portfolio turnover 41% 136% 189% 314%
- ----------------------------------------------------------------------------

<CAPTION>
<S> <C>
1991(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------
Net investment income 0.25
- ----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 0.75
- ---------------------------------------------------------------------------- -----------
Total from investment operations 1.00
- ----------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------
Distributions from net investment income (0.16)
- ----------------------------------------------------------------------------
Distributions in excess of net investment income (b) --
- ----------------------------------------------------------------------------
Distributions from net realized gain on investments and foreign currency
transactions --
- ---------------------------------------------------------------------------- -----------
Total distributions (0.16)
- ---------------------------------------------------------------------------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.84
- ---------------------------------------------------------------------------- -----------
TOTAL RETURN (C) 10.07%
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------
Expenses 0.32%*
- ----------------------------------------------------------------------------
Net investment income 7.54%*
- ----------------------------------------------------------------------------
Expense waiver/reimbursement (d) 1.18%*
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $23,465
- ----------------------------------------------------------------------------
Portfolio turnover 35 %
- ----------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from June 4, 1991 (date of initial
public investment) to November 30, 1991. For the period from the start of
business, May 15, 1991, to June 3, 1991, the net investment income was
distributed to the Corporation's Adviser.

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

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

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

Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1995, which can be obtained
free of charge.

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

FINANCIAL HIGHLIGHTS--CLASS B SHARES
FEDERATED INTERNATIONAL INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated January 12, 1996, on the
Fund's financial statements for the year ended November 30, 1995, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free from charge.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1995 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.51 $ 10.21
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.77 0.08
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency 0.78 0.22
- ----------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 1.55 0.30
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Distributions from net investment income (0.70) --
- ----------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.36 $ 10.51
- ----------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 15.28% 2.44%
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 2.10% 2.11%*
- -----------------------------------------------------------------------------------------------
Net investment income 5.76% 7.07%*
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.10% 0.10%*
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,123 $101
- -----------------------------------------------------------------------------------------------
Portfolio turnover 41% 136 %
- -----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from September 19, 1994 (start of
business) to November 30, 1994.

(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 for the fiscal year ended November 30, 1995, which can be obtained
free of charge.

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

FINANCIAL HIGHLIGHTS--CLASS C SHARES
FEDERATED INTERNATIONAL INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated January 12, 1996, on the
Fund's financial statements for the year ended November 30, 1995, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free from charge.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C> <C>
1995 1994 1993(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.48 $ 11.84 $ 10.23
- -----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------
Net investment income 0.60 0.58 0.41
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency 0.95 (0.72) 1.58
- ----------------------------------------------------------------------------------- --------- ----------- -----------
Total from investment operations 1.55 (0.14) 1.99
- ----------------------------------------------------------------------------------- --------- ----------- -----------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------
Distributions from net investment income (0.67) (0.57) (0.38)
- -----------------------------------------------------------------------------------
Distributions from net realized gain on investments and foreign currency
transactions -- (0.65) --
- ----------------------------------------------------------------------------------- --------- ----------- -----------
Total distributions (0.67) (1.22) (0.38)
- ----------------------------------------------------------------------------------- --------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.36 $ 10.48 $ 11.84
- ----------------------------------------------------------------------------------- --------- ----------- -----------
TOTAL RETURN (B) 15.32% (1.54%) 19.67%
- -----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------
Expenses 2.06% 2.05% 2.05%*
- -----------------------------------------------------------------------------------
Net investment income 5.96% 6.00% 5.39%*
- -----------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.14% 0.10% 0.21%*
- -----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,015 $8,098 $4,767
- -----------------------------------------------------------------------------------
Portfolio turnover 41% 136 % 189 %
- -----------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from March 31, 1993 (start of business)
to November 30, 1993.

(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 for the fiscal year ended November 30, 1995, which can be obtained
free of charge.

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

GENERAL INFORMATION

The Corporation was established as FT International Trust, a Massachusetts
business trust, on March 9, 1984, and reorganized as a corporation under the
laws of the state of Maryland on February 11, 1991. At a special meeting of
shareholders held on March 15, 1994, the shareholders of the Corporation
approved an amendment to the Articles of Incorporation to change the name of the
Corporation to International Series, Inc. The Corporation's address is Liberty
Center, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. 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 of the Corporation (the
"Directors") has established three classes of shares known as Class A Shares,
Class B Shares, and Class C Shares (individually and collectively as the context
requires, "Shares").

For information on how to purchase the 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.

Class A Shares are sold at net asset value plus an applicable sales load 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 and are redeemed at net asset value.
However, a contingent deferred sales charge is imposed on certain Shares which
are redeemed within six full years of the date 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."

The Fund 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."

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

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The Fund's objective is to seek a high level of current income in U.S. Dollars
consistent with prudent investment risk. The Fund has a secondary investment
objective of capital appreciation. The investment objectives cannot be changed
without the approval of the shareholders. The Fund will pursue these objectives
by investing in high-quality debt securities denominated primarily in foreign
currencies.
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. Unless indicated otherwise, the investment policies of the
Fund may be changed by the Directors without shareholder approval. Shareholders
will be notified before any material change in the policies becomes effective.

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

The Fund will invest primarily in high-quality debt securities denominated in
the currencies of the nations that are members of the Organization for Economic
Cooperation and Development. These nations include, but are not limited to, the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Luxembourg, Netherlands,
New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom,
and the United States. The Fund will invest at least 65%, and under normal
market conditions substantially all of its total assets in high-quality debt
securities denominated in foreign currencies of issuers located in at least
three countries outside of the United States. Additionally, investments may be
made in securities denominated in the European Currency Unit (the "ECU"), a
multinational currency unit which represents specified amounts of the currencies
of certain member states of the European Economic Community.

The high-quality debt securities in which the Fund will invest will possess a
minimum credit rating of A as assigned by Standard & Poor's Ratings Group
("S&P") or A by Moody's Investors Service, Inc. ("Moody's"), or, if unrated,
will be judged by Federated Global Research Corp., the Fund's investment adviser
(the "Adviser") to be of comparable quality. Because the average quality of the
Fund's portfolio investments should remain constantly between A and AAA, the
Fund will seek to avoid the adverse consequences that may arise for some debt
securities in difficult economic circumstances. Downgraded securities will be
evaluated on a case by case basis by the Adviser. The Adviser will determine
whether or not the security continues to be an acceptable investment. If not,
the security will be sold. A description of the ratings categories is contained
in the Appendix to the Statement of Additional Information.

The Fund's portfolio of debt securities will be comprised mainly of foreign
government, foreign governmental agency or supranational institution bonds. In
addition, the Fund will also invest in high quality debt securities issued by
corporations in the currencies specified above and subject to the credit
limitations listed above. No more than 25% of the Fund's total assets will be
invested in the securities of issuers located in any one country. The Fund will
also invest in both exchange traded and over-the-counter options, subject to the
limitations outlined in this prospectus.

The prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.

FOREIGN GOVERNMENT SECURITIES

The foreign government securities in which the Fund may invest generally consist
of obligations supported by national, state or provincial governments or similar
political subdivisions. Foreign government securities also include debt
obligations of supranational entities, which include international organizations
designed or supported by governmental entities to promote economic
reconstruction or development, international banking institutions and related
government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank and the Inter-American Development Bank.

Foreign government securities also include debt securities of
"quasi-governmental agencies." Debt securities of quasi-governmental agencies
are either debt securities issued by entities which are owned by a national,
state or equivalent government or are obligations of a political unit that are
not backed by the national government's full faith and credit and general taxing
powers. Further, foreign government securities include mortgage-related
securities issued or guaranteed by national, state or provincial governmental
instrumentalities, including quasi-governmental agencies.

TEMPORARY INVESTMENTS

Up to 10% of the Fund's total assets may be invested at any one time in cash
deposits or in certificates of deposit issued by banks of high credit quality,
or in commercial paper with an A1/P1 rating assigned by S&P or Moody's, or in
repurchase agreements. At the discretion of the Adviser, these instruments may
be denominated in foreign currencies or U.S. Dollars.

REPURCHASE AGREEMENTS

Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell securities to the Fund and agree at the
time of sale to repurchase them at a mutually agreed upon time and price. 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.

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 a future time. The seller's failure to
complete the transaction 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. Accordingly, the Fund may pay more/less than the
market value of the securities on the settlement date.

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 its portfolio
securities on a short-term or long-term basis up to one-third the value of its
total assets 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.

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.

RISK CONSIDERATIONS

Investing in foreign securities carries substantial risks in addition to those
associated with investments in domestic securities. In an attempt to reduce some
of these risks, the Fund will attempt to distribute its investments broadly
among foreign countries. The debt securities of at least three different foreign
countries will always be represented.

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 U.S.

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 and 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.

ALLOCATION

The allocation of the Fund's assets in a particular market and currency will be
based on a fundamental assessment of the economic strength of each relevant
country combined with considerations of credit quality and currency and interest
rate trends. These factors are reviewed on a regular basis in order to derive
specific interest rate and currency forecasts, which are quantified in terms of
total return. The market and currency allocation of the Fund will vary to
achieve an optimal mix of investments to achieve the investment objectives of
the Fund.

DURATION

Duration measures the magnitude of the change in the price of a debt security
relative to a given change in the market rate of interest. The duration of a
debt security depends primarily upon the security's coupon rate, maturity date,
and level of market interest rates for similar debt securities. There will be no
limit on the duration of any one individual issue purchased by the Fund, except
that the purchase of an issue that has no final maturity date shall not be
permitted. The weighted average duration of the Fund shall not exceed ten years
and shall not be less than one year, but will normally fall within a range of
three to seven years. The Adviser regards that range as being consistent with a
prudent attitude towards risk. Shifts outside this range would be made only
under unusual circumstances.

FOREIGN SECURITIES

Investments in foreign securities involve special risks that differ from those
associated with investments in domestic securities. The risks associated with
investments in foreign securities relate to political and economic developments
abroad, as well as those that result from the differences between the regulation
of domestic securities and issuers and foreign securities and issuers. These
risks may include, but are not limited to, expropriation, confiscatory taxation,
currency fluctuations, withholding taxes on interest, limitations on the use or
transfer of Fund assets, political or social instability and adverse diplomatic
developments. It may also be more difficult to enforce contractual obligations
or obtain court judgments abroad than would be the case in the United States
because of differences in the legal systems. Moreover, individual foreign
economies may differ favorably or unfavorably from the domestic economy in such
respects as growth of gross national product, the rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.

Additional differences exist between investing in foreign and domestic
securities. Examples of such differences 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.

CURRENCY RISKS

Because the majority of the debt 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 that 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 U.S. tax code, the Fund is required to separately account for the
foreign currency component of gains or losses, which will usually be viewed
under the U.S. tax code as items of ordinary and distributable income 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 interpretation, 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.
The Fund will engage in foreign currency exchange transactions in connection
with its investments in foreign securities. 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.

The Adviser believes that active management of currency risks through a variety
of hedging vehicles and strategies can considerably limit the risk of capital
loss through movements in the foreign exchange markets, such as those described
above. The Adviser will not engage in hedging for speculative purposes.

HEDGING VEHICLES

The Fund may use the following hedging vehicles in an attempt to manage currency
and interest rate risks:

. forward foreign currency exchange contracts

. options contracts

. futures contracts

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

A forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers. When the Fund
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may want to establish the U.S. dollar cost or proceeds, as
the case may be. By entering into a forward contract in U.S. Dollars for the
purchase or sale of the amount of foreign currency involved in an underlying
security transaction, the Fund is able to protect itself against a possible loss
between trade and settlement dates resulting from an adverse change in the
relationship between the U.S. dollar and such foreign currency. However, this
tends to limit potential gains which might result from a positive change in such
currency relationships.

There is no limitation as to the percentage of the Fund's assets that may be
committed under forward foreign currency exchange contracts. The Fund does not
enter into such forward contracts or maintain a net exposure in such contracts
where the Fund would be obligated to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or, in the case of a "cross-hedge" (see "Hedging
Strategies" below), denominated in a currency or currencies that the Adviser
believes will reflect a high degree of correlation with the currency with regard
to price movements. The Fund generally does not enter into a forward foreign
currency exchange contract with a term longer than one year.

OPTIONS

The Fund may deal in options on foreign currencies, foreign currency futures,
securities, and securities indices, which options may be listed for trading on a
national securities exchange or traded over-the-counter. The Fund may write
covered call options and secured put options on up to 25% of its net assets and
may purchase put and call options provided that no more than 5% of the fair
market value of its net assets may be invested in premiums on such 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 a 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 non-performance 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 a wider range of expiration dates and exercise
prices, than are exchange traded options.

FUTURES

Futures contracts are contracts that obligate the long or short holder to take
or make delivery of a specified quantity of an asset, such as a currency, a
security, or the cash value of a securities index at a specified future date at
a specified price. The Fund may engage in futures transactions, but will not
participate in futures contracts if the sum of its initial margin deposits on
open contracts will exceed 5% of the fair market value of the Fund's net assets.

HEDGING STRATEGIES

CURRENCY HEDGING

When the Adviser believes that the currency of a particular foreign country may
suffer a substantial decline against the U.S. dollar, it may enter into a
forward contract to sell an amount of that foreign currency for a fixed U.S.
dollar amount approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency (i.e., "hedge"). The Fund may,
as an alternative, enter into a forward contract to sell a different foreign
currency for a fixed U.S. dollar amount where the Adviser believes that the U.S.
dollar value of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated (i.e., "cross-hedge"). A
cross hedge can be achieved not only by using a "proxy" currency in which Fund
securities are denominated, but also by using the Canadian dollar as a "proxy"
currency for the U.S. dollar. This strategy may be beneficial because the level
of divergence in the exchange rates of U.S. and Canadian currencies has
historically tended to be relatively small.

For example, the Fund may invest in securities denominated in a Western European
currency, such as the French Franc, and seek to hedge against the effect of an
increase in the value of the U.S. dollar against that currency by entering into
a forward foreign currency exchange contract to sell the lower yielding German
Mark, which has historically had price movements that tend to correlate closely
with those of the French Franc, thereby creating a hedge similar to the simple
Dollar/Franc hedge, but at a possibly lower cost. In addition, the Fund might
arrange to sell those Marks against Canadian Dollars in an effort to minimize
hedging costs.

INTEREST RATE HEDGING

The Fund may engage in futures transactions and may use options in an attempt to
hedge against the effects of fluctuations in interest rates and other market
conditions. For example, if the Fund owned long-term bonds and interest rates
were expected to rise, it could sell futures contracts or the cash value of a
securities index. If interest rates did increase, the value of the bonds in the
Fund would decline, but this decline would be offset in whole or in part by an
increase in the value of the Fund's futures contracts or the cash value of the
securities index.
If, on the other hand, long-term interest rates were expected to decline, the
Fund could hold short-term debt securities and benefit from the income earned by
holding such securities, while at the same time the Fund could purchase futures
contracts on long-term bonds or the cash value of a securities index. Thus, the
Fund could take advantage of the anticipated rise in the
value of long-term bonds without actually buying them. The futures contracts and
short-term debt securities could then be liquidated and the cash proceeds used
to buy long-term bonds.

GENERAL

The Fund might not employ any of the techniques or strategies described above,
and there can be no assurance that any technique or strategy (or combination
thereof) used will succeed. The use of these techniques and strategies involves
certain risks, including:

. dependence on the Adviser's ability to predict movements in the prices of
assets being hedged or movements in interest rates and currency markets;

. imperfect correlation between the hedging instruments and the securities or
currencies being hedged;

. the fact that skills needed to use these instruments are different from those
needed to select the Fund's securities;

. the possible absence of a liquid secondary market for any particular
instrument at any particular time;

. possible impediments to effective portfolio management or the ability to meet
redemption requests or other short-term obligations because of the percentage
of the Fund's assets segregated to cover its obligations; and

. the possible need to defer closing out hedged positions to avoid adverse tax
consequences.

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
objectives and regulatory and federal tax considerations.

NON-DIVERSIFICATION

The Fund is a non-diversified investment portfolio. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Fund, therefore, will entail greater risk than would exist in
a diversified portfolio of securities because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of the Fund's portfolio. Any economic, political, or regulatory
developments affecting the value of the securities in the Fund's portfolio will
have a greater impact on the total value of the portfolio than would be the case
if the portfolio were diversified among more issuers.

The Fund intends to comply with Subchapter M of the Internal Revenue Code (the
"Code"). This undertaking requires that at the end of each quarter of the
taxable year, with regard to at least 50% of the Fund's total assets, no more
than 5% of its total assets are invested in the securities of a single issuer;
beyond that, no more than 25% of its total assets are invested in the securities
of a single issuer.

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
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 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 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 up to 15% of the value of those assets to secure
such borrowings; nor

sell securities short except under strict limitations.

The above investment limitation cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material changes
in these limitations become effective.

The Fund will not:

invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; nor

invest more than 15% of the value of its net assets in restricted or other
securities determined by the Directors not to be liquid, including repurchase
agreements with maturities longer than seven days after notice and certain OTC
options.

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

NET ASSET VALUE

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 loads and
contingent deferred sales charges in different levels of expenses.

CLASS A SHARES

An investor who purchases Class A Shares pays a maximum sales load of 4.50% at
the time of purchase. Certain purchases of Class A Shares are not subject to a
sales charge. See "Investing in Class A Shares." 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 qualify for reduced
sales loads. See "Reducing or Eliminating the Sales Load." Class A Shares have
no conversion feature.

CLASS B SHARES

Class B Shares are sold without an initial sales load, 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 load, 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.)

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:
<TABLE>
<CAPTION>
SALES DEALER
SALES CHARGE 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
<S> <C> <C> <C>
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 $1,000,000 2.00% 2.04% 1.80%
$1,000,000 or
greater 0.00% 0.00% 0.25%*
</TABLE>

*See sub-section entitled "Dealer Concession" below.

Shareholders designated as Liberty Life Members may purchase additional Shares
at net asset value, without a sales charge, except that a sales charge will be
imposed when the Shares are acquired in exchange for shares of another Federated
Fund.

No sales charge is imposed for Class A Shares purchased through bank trust
departments, investment advisers 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 to
shareholders designated as Liberty Life Members. However, investors who purchase
Shares through a trust department, investment adviser, or retirement plan may be
charged an additional service fee by the institution. Additionally, no sales
charge is imposed for Class A Shares purchased through "wrap accounts" or
similar programs, under which clients pay a fee or fees for services.

DEALER CONCESSION

In addition to the dealer concession as noted in the table above, the
distributor, in its sole discretion, may uniformly offer to pay all dealers
selling Shares additional amounts, all or a portion of which may be paid from
the sales charge it normally retains or any other source available to it. Such
payments may take the form of cash or promotional incentives, such as payment 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 of 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.

SUBACCOUNTING SERVICES

Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. Institutions holding Class A
Shares in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other services provided which may be
related to the ownership of Class A Shares. This prospectus should, therefore,
be read together with any agreement between the customer and the institution
with regard to the services provided, the fees charged for those services, and
any restrictions and limitations
imposed. State securities laws may require certain financial institutions such
as depository institutions to register as dealers.

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;

. signing a 13-month letter of intent;
. using the reinvestment privilege;

. purchases with proceeds from redemptions of unaffiliated investment companies;
or

. concurrent purchases.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

As shown in the table on page 19, larger purchases may eliminate or 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 eliminated or 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 $90,000 and he purchases $10,000 more at the current public offering price,
the sales charge as a percentage of public offering price on the additional
purchase according to the schedule now in effect would be 3.75%, not 4.50%.

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 load after it
confirms the purchases.

LETTER OF INTENT

If a shareholder intends to purchase at least $50,000 of shares in the 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 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 applied to the
shareholder's account at the end of the 13-month period unless the amount
specified in the letter of intent is not purchased. In this event, 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 load 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 the 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 a mutual fund which
was sold with a sales charge or commission and was not distributed by Federated
Securities Corp. (This does not include shares which were or would be subject to
a contingent deferred sales charge upon redemption.) 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.

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge elimination or reduction, a
shareholder has the privilege of combining concurrent purchases of Class A
Shares 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 the Class A Shares of this Fund, the sales charge would be reduced.

To receive this sales charge elimination or 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 eliminate or reduce
the sales charge after it confirms the purchases.

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 the fifteenth
of the month, eight 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

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. It is the financial
institution's responsibility to transmit orders promptly. 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. Financial
institutions may charge additional fees for their services.

The financial institutions which maintain 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 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 Services Company, c/o State Street
Bank and Trust Company, Boston, Massachusetts; Attention: 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 011000028. 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

Shares may be purchased by sending a check to: Federated Services Company, P.O.
Box 8600, Boston, Massachusetts 02266-8600. The check should be made payable to
Fund Name, Fund Class Name. Please include an account number on the check.
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received), and
Shares begin earning dividends the next day.

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
applicable sales charge. A shareholder may apply for participation in this
program through a financial institution or directly through the Fund.

RETIREMENT PLANS

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

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

EXCHANGE PRIVILEGE

CLASS A SHARES

Class A shareholders may exchange all or some of their Shares for Class A Shares
of other Federated Funds, as listed herein, 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.

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 exchanges
Shares. To the extent that a 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.
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, as listed herein, 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.) To the extent that a shareholder
exchanges Shares for Class C
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. For more information,
see "Contingent Deferred Sales Charge."

The Fund has exchange privileges with the following Federated Funds:

American Leaders Fund, Inc., Capital Growth Fund (Class A Shares and Class C
Shares only); Federated Bond Fund; Federated Small Cap Strategies Fund;
Federated World Utility Fund; Fund for U.S. Government Securities, Inc.,
Federated International Equity Fund; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Utility Fund, Inc.; Limited Term
Fund (Class A Shares only); Limited Term Municipal Fund (Class A Shares only);
Michigan Intermediate Municipal Trust (Class A Shares only); Pennsylvania
Municipal Income Fund (Class A Shares only); Strategic Income Fund; and Tax-Free
Instruments Trust (Class A Shares only).

Prospectuses for these funds are available by writing to Federated Securities
Corp.

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 Funds, as long as they maintain a $500 balance in one
of the Federated Funds.

REQUIREMENTS FOR EXCHANGE

This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in 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 on the circumstances, a short-term or long-term 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 Services Company, 500 Victory Road--2nd
Floor, Quincy, Massachusetts 02171.

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 Services Company, P.O. Box 8600, Boston, Massachusetts
02266-8600, and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions may be 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 not receive any dividend that
is payable to shareholders of record on that date. 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. Redemption requests must be received in proper form and may be made
as described below.

REDEEMING SHARES THROUGH YOUR 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 wire transferred 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 been 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 redemption instructions may 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 this method of
redemption, shareholders would be promptly notified.

REDEEMING SHARES BY MAIL

Shares may be redeemed in any amount by mailing a written request to: Federated
Services Company, Fund Name, Fund Class, P.O. Box 8600, Boston, Massachusetts
02266-8600. If share certificates have been issued, they should be sent endorsed
with the written request by registered or certified mail to the address noted
above.

The written request should state: the Fund name and the 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. It
is recommended that any share certificates be sent by insured mail with the
written request.

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 or 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.

Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.

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. 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 load, 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 of 1.00% 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.

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:
<TABLE>
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
<S> <C>
First 5.50%
Second 4.75%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
</TABLE>

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

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 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.
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 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, as amended, of
a 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; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. 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 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, as amended, 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

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

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Annual confirmations are sent to report dividends paid during the
year.

DIVIDENDS

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares on the payment date, at the ex-dividend date net asset value without a
sales load, unless shareholders request cash payments on the new account form or
by writing to 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. A portion of distributions to shareholders could,
under some circumstances, be reclassified as a return of capital for income tax
purposes (See "Federal Income Tax").

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 Shares 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.

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

INTERNATIONAL SERIES,
INC. 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 Federated Global Research Corp.,
the Fund's investment adviser, subject to direction by the Board of 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

The Adviser receives an annual investment advisory fee equal to 0.75% the Fund's
average daily net assets. The fees paid by the Fund, while higher than the
advisory fee paid by other mutual funds in general, is comparable to fees paid
by many mutual funds with similar objectives and policies. The Adviser may
voluntarily waive a portion of its fees. The Adviser can terminate this
voluntary waiver at any time at its sole discretion. The Adviser has also
undertaken to reimburse the Fund for operating expenses in excess of limitations
established by certain states.

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 John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, 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 $80 billion invested across more than
250 funds under management and/or administration by its subsidiaries, as of
December 31, 1995, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,800 employees,
Federated continues to be led by the management who founded the company in 1955.
Federated Funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated Funds for their clients.

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

Henry A. Frantzen has been the Fund's portfolio manager since December 1995. Mr.
Frantzen joined Federated Investors in 1995 as an Executive Vice President of
the Fund's investment adviser. Mr. Frantzen served as Chief Investment Officer
of international equities at Brown Brothers Harriman & Co. from 1992 to 1995. He
was the Executive Vice President and Director of Equities at Oppenheimer
Management Corporation from 1989 to 1991. Mr. Frantzen received his B.S. in
finance and marketing from the University of North Dakota.

Drew J. Collins has been the Fund's portfolio manager since December 1995. Mr.
Collins joined Federated Investors in 1995 as a Senior Vice President of the
Fund's investment adviser. Mr. Collins served as a Vice President/Portfolio
Manager of international equity portfolios at Arnhold 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. Mr. Collins is a Chartered Financial Analyst and received his M.B.A. in
finance from the University of Pennsylvania.

Robert M. Kowit has been the Fund's portfolio manager since December 1995. Mr.
Kowit joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. Mr. Kowit 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 John Hancock Advisers. Mr. Kowit received his M.B.A. from Iona
College with a concentration in finance.

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,
PA 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 computed at
an annual rate of up to .25 of 1% of the average daily net assets for Class A
Shares and up to .75 of 1% of the average daily net assets for Class B Shares
and Class C Shares to finance any activity which is principally intended to
result in the sale of Shares subject to 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 each class 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 service 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 separately 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
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 1% 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.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS.

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 Fund's Adviser or its
affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Corporation and the Fund. Federated
Administrative Services provides these at an annual rate which relates to the
average aggregate daily net assets of all Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE DAILY NET ASSETS
FEE OF THE FEDERATED FUNDS
<C> <S>
.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
</TABLE>

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 Administrative Services may choose voluntarily to waive a portion of
its fee.

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

VOTING RIGHTS

Each Share 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 Corporation have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that particular 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 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. The Directors shall call a special meeting of shareholders upon the
written request of shareholders owning at least 10% of the Corporation's
outstanding shares 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, as amended, 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.

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 IRA or qualified retirement plan until distributed.

Quarterly distributions from the Fund are based on estimates of book income for
the year. Tax
basis income includes gains or losses attributable to currency fluctuation,
whereas book income generally consists solely of the coupon income generated by
the portfolio. Due to differences in the book and tax treatment of fixed incomes
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, as
amended, 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

Fund 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 the total return for each class of
Shares.

Total return represents the change, over a specified 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 Class A Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
Shares over a thirty-day period by the maximum offering price per Share of Class
A Shares 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 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 load or contingent deferred sales charges, which, if
excluded, would increase the total return and yield.

Yield and total return will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares. Expense differences between Class A, Class B and
Class C Shares may affect the performance of each class.

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

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated International Income Fund
Class A Shares Federated Investors Tower
Class B Shares Pittsburgh, Pennsylvania 15222-3779
Class C Shares
- ---------------------------------------------------------------------------------------------------------------------------

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

Investment Adviser
Federated Global Research Corp. 175 Water Street
New York, New York 10038-4965
- ---------------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
- ---------------------------------------------------------------------------------------------------------------------------

Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ---------------------------------------------------------------------------------------------------------------------------

Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

[This Page Intentionally Left Blank]

FEDERATED INTERNATIONAL
INCOME FUND
(FORMERLY, INTERNATIONAL
INCOME FUND)
(A PORTFOLIO OF INTERNATIONAL
SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

PROSPECTUS

A Non-Diversified Portfolio of
International Series, Inc.,
An Open-End Management
Investment Company

Prospectus dated January 31, 1996

[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Cusip 46031P100
Cusip 46031P506
Cusip 46031P209

FEDERATED INTERNATIONAL INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)
(A PORTFOLIO OF INTERNATIONAL SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES

PROSPECTUS

The Class A Shares of Federated International Income Fund (the "Fund") represent
interests in a non-diversified investment portfolio of International Series,
Inc. (formerly, FT Series, Inc.) (the "Corporation"), an open-end, management
investment company (a mutual fund).

The Fund's objective is to seek a high level of current income in U.S. Dollars
consistent with prudent investment risk. The Fund has a secondary objective of
capital appreciation. The Fund will pursue these objectives by investing in
high-quality debt securities denominated primarily in foreign currencies.

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 Fund. Keep this prospectus for future reference.

Prospectus dated January 31, 1996

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

TABLE OF CONTENTS

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

Financial Highlights...........................................................2
General Information............................................................3

Investment Information.........................................................4
Investment Objective.........................................................4
Investment Policies..........................................................4
Hedging Strategies..........................................................10
Investment Limitations......................................................12

Net Asset Value...............................................................13
Investing in Class A Shares...................................................13
Share Purchases.............................................................13
What Shares Cost............................................................14
Reducing or Eliminating the
Sales Charge.............................................................15
Systematic Investment Program...............................................16
Retirement Plans............................................................17
Subaccounting Services......................................................17

Exchange Privilege............................................................17
Eliminated or Reduced Sales Charge..........................................17
Requirements for Exchange...................................................18
Tax Consequences............................................................18
Making an Exchange..........................................................18

Redeeming Class A Shares......................................................19
Through a Financial Institution.............................................19
Systematic Withdrawal Program...............................................20
Contingent Deferred Sales Charge............................................20
Elimination of Contingent
Deferred Sales Charge....................................................21

Account and Share Information.................................................22
International Series, Inc. Information........................................23
Management of the Corporation...............................................23
Distribution of Class A Shares..............................................24
Administration of the Fund..................................................25
Brokerage Transactions......................................................26

Shareholder Information.......................................................26
Voting Rights...............................................................26

Tax Information...............................................................27
Federal Income Tax..........................................................27
State and Local Taxes.......................................................27

Performance Information.......................................................27

Other Classes of Shares.......................................................28

Addresses.....................................................................29

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

SUMMARY OF FUND EXPENSES
FEDERATED INTERNATIONAL INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)
<TABLE>
<S> <C> <C>
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).............................................................................. 0.65%
12b-1 Fee (after waiver) (3)................................................................................... 0.08%
Total Other Expenses........................................................................................... 0.57%
Shareholder Services Fee (after waiver) (4)..................................................... 0.12%
Total Operating Expenses (5).......................................................................... 1.30%

<CAPTION>
CLASS A SHARES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).......................
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)...............................................................
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable) (1)...........................................................
Redemption Fee (as a percentage of amount redeemed, if applicable)..................................
Exchange Fee........................................................................................
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (2)...................................................................
12b-1 Fee (after waiver) (3)........................................................................
Total Other Expenses................................................................................
Shareholder Services Fee (after waiver) (4).....................................................
Total Operating Expenses (5)...............................................................

<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
</TABLE>

(3) The maximum 12b-1 fee is 0.25%.

(4) The maximum shareholder services fee is 0.25%.

(5) The total operating expenses would have been 1.70% absent the voluntary
waivers of portions of the management fee, the 12b-1 fee and the
shareholder services fee.

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.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period....................................................................... $63 $84 $113 $195
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $58 $84 $113 $195
</TABLE>

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 INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated January 12, 1996, on the
Fund's financial statements for the year ended November 30, 1995, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free from charge.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.52 $ 11.86 $ 10.47 $ 10.84 $ 10.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.79 0.70 0.88 0.62 0.25
- ------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 0.84 (0.76) 1.40 (0.20) 0.75
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Total from investment operations 1.63 (0.06) 2.28 0.42 1.00
- ------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Distributions from net investment income (0.77) (0.63) (0.75) (0.71) (0.16)
- ------------------------------------------------------------
Distributions in excess of net investment income (b) -- -- -- (0.05) --
- ------------------------------------------------------------
Distributions from net realized gain on investments and
foreign currency transactions -- (0.65) (0.14) (0.03) --
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
Total distributions (0.77) (1.28) (0.89) (0.79) (0.16)
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 11.38 $ 10.52 $ 11.86 $ 10.47 $ 10.84
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
TOTAL RETURN (C) 16.12% (0.84%) 22.95% 3.82% 10.07%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 1.30% 1.30% 1.25% 0.99% 0.32%*
- ------------------------------------------------------------
Net investment income 6.79% 6.67% 7.71% 5.83% 7.54%*
- ------------------------------------------------------------
Expense waiver/reimbursement (d) 0.40% 0.20% 0.27% 0.62% 1.18%*
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $173,905 $209,008 $220,602 $86,937 $23,465
- ------------------------------------------------------------
Portfolio turnover 41% 136% 189% 314% 35%
- ------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from June 4, 1991 (date of initial
public investment) to November 30, 1991. For the period from start of
business, May 15, 1991, to June 3, 1991, the net investment income was
distributed to the Corporation's Adviser.

(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 for the fiscal year ended
November 30, 1995, which can be obtained free of charge.

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

GENERAL INFORMATION

The Corporation was established as FT International Trust, a Massachusetts
business trust, on March 9, 1984, and reorganized as a corporation under the
laws of the state of Maryland on February 11, 1991. At a special meeting of
shareholders held on March 15, 1994, the shareholders of the Corporation
approved an amendment to the Articles of Incorporation to change the name of the
Corporation to International Series, Inc. The Corporation's address is Liberty
Center, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The
Articles of Incorporation permit the Corporation to offer separate series of
shares representing interests in separate portfolios of securities. The shares
in any one portfolio may be offered in separate classes. With respect to this
Fund, as of the date of this prospectus, the Board of Directors (the
"Directors") has established three classes of shares, known as Class A Shares,
Class B Shares, and Class C Shares. This prospectus relates only to Class A
Shares (the "Shares") of the Corporation's portfolio known as Federated
International Income Fund.

Shares of the Fund are designed for investors who wish to spread their
investments beyond the United States and who are prepared to accept the
particular risks associated with these investments. It is not intended to
provide a complete investment program for an investor. For more information on
how to purchase Class A Shares please refer to "How to Purchase Shares." 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." The Fund 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."A
minimum initial investment of $500 is required, unless the investment is in a
retirement account, in which case the minimum investment is $50.
The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Federated Liberty Funds."

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

The Fund invests primarily in high-quality debt securities denominated in the
currencies of the nations that are members of the Organization for Economic
Cooperation and Development. These nations include, but are not limited to, the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Luxembourg, Netherlands,
New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom,
and the United States. The Fund will invest at least 65%, and under normal
market conditions substantially all of its total assets in high-quality debt
securities denominated in foreign currencies of issuers located in at least
three countries outside of the United States. Additionally, investments may be
made in securities denominated in the European Currency Unit (the "ECU"), a
multinational currency unit which represents specified amounts of the currencies
of certain member states of the European Economic Community.

The high-quality debt securities in which the Fund will invest will possess a
minimum credit rating of A as assigned by Standard & Poor's Ratings Group
("S&P") or A by Moody's Investors Service, Inc. ("Moody's"), or, if unrated,
will be judged by Federated Global Research Corp., the Fund's investment adviser
(the "Adviser") , to be of comparable quality. Because the average quality of
the Fund's portfolio investments should remain constantly between A and AAA, the
Fund will seek to avoid the adverse consequences that may arise for some debt
securities in difficult economic circumstances. Downgraded securities will be
evaluated on a case by case basis by the Adviser. The Adviser will determine
whether or not the security continues to be an acceptable investment. If not,
the security will be sold. A description of the ratings categories is contained
in the Appendix to the Statement of Additional Information.

The prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.

FOREIGN GOVERNMENT SECURITIES

The foreign government securities in which the Fund may invest generally consist
of obligations supported by national, state or provincial governments or similar
political subdivisions. Foreign government securities also include debt
obligations of supranational entities, which include international organizations
designed or supported by governmental entities to promote economic
reconstruction or development, international banking institutions and related
government agencies. Examples include the International Bank for Reconstruction
and Development (the World Bank), the Asian Development Bank and the
Inter-American Development Bank.

TEMPORARY INVESTMENTS

WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS

LENDING OF PORTFOLIO SECURITIES

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.

RISK CONSIDERATIONS

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.

portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.

ALLOCATION

DURATION

FOREIGN SECURITIES

Additional differences exist between investing in foreign and domestic
securities. Examples of such differences 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

CURRENCY RISKS

Because the majority of the debt 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 that 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 U.S. tax code, the Fund is required to separately account for the
foreign currency component of gains or losses, which will usually be viewed
under the U.S. tax code as items of ordinary and distributable income 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.

The Fund will engage in foreign currency exchange transactions in connection
with its investments in foreign securities. 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.

HEDGING VEHICLES

The Fund may use the following hedging vehicles in an attempt to manage currency
and interest rate risks:

. forward foreign currency exchange contracts

. options contracts

. futures contracts

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

A forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are traded directly between currency
traders (usually large commercial banks) and their customers. When the Fund
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, it may want to establish the U.S. dollar cost or proceeds, as
the case may be. By entering into a forward contract in U.S. Dollars for the
purchase or sale of the amount of foreign currency involved in an underlying
security transaction, the Fund is able to protect itself against a possible loss
between trade and settlement dates resulting from an adverse change in the
relationship between the U.S. Dollar and such foreign currency. However, this
tends to limit potential gains which might result from a positive change in such
currency relationships.

OPTIONS

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 non-performance 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 a wider range of expiration dates and exercise
prices, than are exchange traded options.

FUTURES
Futures contracts are contracts that obligate the long or short holder to take
or make delivery of a specified quantity of an asset, such as a currency, a
security, or the cash value of a securities index at a specified future date at
a specified price. The Fund may engage in futures transactions, but will not
participate in futures contracts if the sum of its initial margin deposits on
open contracts will exceed 5% of the fair market value of the Fund's net assets.

HEDGING STRATEGIES

CURRENCY HEDGING

When the Adviser believes that the currency of a particular foreign country may
suffer a substantial decline against the U.S. Dollar, it may enter into a
forward contract to sell an amount of that foreign currency for a fixed U.S.
Dollar amount approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency (i.e., "hedge"). The Fund may,
as an alternative, enter into a forward contract to sell a different foreign
currency for a fixed U.S. Dollar amount where the Adviser believes that the U.S.
Dollar value of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated (i.e., "cross-hedge"). A
cross hedge can be achieved not only by using a "proxy" currency in which Fund
securities are denominated, but also by using the Canadian Dollar as a "proxy"
currency for the U.S. Dollar. This strategy may be beneficial because the level
of divergence in the exchange rates of U.S. and Canadian currencies has
historically tended to be relatively small.

INTEREST RATE HEDGING

value of long-term bonds without actually buying them. The futures contracts and
short-term debt securities could then be liquidated and the cash proceeds used
to buy long-term bonds.

GENERAL

. dependence on the Adviser's ability to predict movements in the prices of
assets being hedged or movements in interest rates and currency markets;

. imperfect correlation between the hedging instruments and the securities or
currencies being hedged;

. the fact that skills needed to use these instruments are different from those
needed to select the Fund's securities;

. the possible absence of a liquid secondary market for any particular
instrument at any particular time;

NON-DIVERSIFICATION

PORTFOLIO TURNOVER

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 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 up to 15% of the value of those
assets to secure such borrowings; nor

. sell securities short except under strict limitations.

The Fund will not:

. invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; nor

. invest more than 15% of the value of its net assets in restricted or other
securities determined by the Directors not to be liquid, including repurchase
agreements with maturities longer than seven days after notice and certain OTC
options.

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

NET ASSET VALUE

The Fund's net asset value per Share fluctuates. The net asset value per Share
is determined by adding the interest of each Share in the market value of all
securities and other assets of the Fund, subtracting the interest of each share
in the liabilities of the Fund and those attributable to each Share, and
dividing the remainder by the total number of Shares outstanding.

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.

- -------------------------------------------------------------------------------
INVESTING IN CLASS A SHARES

SHARE PURCHASES

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.

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. It is the financial institution's responsibility to transmit orders
promptly. 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.

DIRECTLY FROM THE DISTRIBUTOR

An investor may place an order to purchase Shares directly from the distributor
once an account has been established. To do so:

. complete and sign the new account form available from the Fund;

. enclose a check made payable to Federated International Income Fund--Class A
Shares; and

. mail both to Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600.

Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.

BY WIRE

To purchase Shares directly from the distributor by wire, call the Fund. All
information needed will be taken over the telephone, and the order is considered
received when the transfer agent's bank, State Street Bank, receives payment by
wire. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, Massachusetts; Attention: Edgewire;
For Credit to: Federated International Income Fund--Class A Shares; Fund Number:
Trade date and order number; Group Number or Dealer Number; Nominee or
Institution Name; ABA Number 011000028. 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.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
Dealer
Sales Charge as Concession
a Percentage of as a
Sales Charge as Price Net Percentage
Amount of a Percentage of Amount of Public
Transaction Public Offering Invested Offering Price
<S> <C> <C> <C>
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
$1,000,000 2.00% 2.04% 1.80%
$1,000,000
or greater 0.00% 0.00% 0.25%*
</TABLE>

*See sub-section entitled "Dealer Concession" below.

No sales charge is imposed for Class A Shares purchased through bank trust
departments, investment advisers 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 to
shareholders designated as Liberty Life Members. However, investors who purchase
Shares through a trust department, investment adviser or retirement plan may be
charged an additional service fee by that institution. Additionally, no sales
charge is imposed for Class A Shares purchased through "wrap accounts" or
similar programs,

under which clients pay a fee or fees for services.

DEALER CONCESSION

In addition to the dealer concession as noted above, the distributor, in its
sole discretion, may uniformly offer to pay all dealers selling Shares
additional amounts, all or a portion of which may be paid from the sales charge
it normally retains or any other source available to it. Such payments may take
the form of cash or promotional incentives, such as payment 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 of 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 Shares through:

. quantity discounts and accumulated purchases;

. signing a 13-month letter of intent;

. using the reinvestment privilege;

. purchases with proceeds from redemptions of unaffiliated investment companies;
or

. concurrent purchases.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

As shown on page 14, larger purchases may eliminate or 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
eliminated or 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 $90,000 and he
purchases $10,000 more at the current public offering price, the sales charge as
a percentage of public offering price on the additional purchase according to
the schedule now in effect would be 3.75%, not 4.50%.

To receive the sales charge elimination or 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 eliminate or 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 eliminated or 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
4.50% 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 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. (This does not include shares which
were or would be subject to a contingent deferred sales charge upon redemption.)
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.

CONCURRENT PURCHASES
For purposes of qualifying for a sales charge elimination or reduction, a
shareholder has the privilege of combining concurrent purchases of Class A
Shares 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 in one of the other Federated Funds with a sales charge, and
$70,000 in Class A Shares of this Fund, the sales charge would be reduced.

To receive this sales charge elimination or 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
eliminate or reduce the sales charge after it confirms the purchases.

SYSTEMATIC INVESTMENT PROGRAM

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 applicable sales
charge. A shareholder may apply for participation in this program through a
financial institution or directly through the Fund.

RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, contact Federated Securities Corp. and
consult a tax adviser.

SUBACCOUNTING SERVICES

Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. Institutions holding Shares
in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other services provided which may be
related to the ownership of Shares. This prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fees charged for those services, and any
restrictions and limitations imposed. State securities laws may require certain
financial institutions such as depository institutions to register as dealers.

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

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 Federated
Funds impose any additional fees on exchanges. Shareholders in certain other
Federated Funds may exchange their shares in the Federated Funds for Class A
Shares.

ELIMINATED OR REDUCED SALES CHARGE

If a shareholder making such an exchange qualifies for an elimination or
reduction of the sales charge, Federated Securities Corp. must be notified in
writing by the shareholder or by his financial institution.

The Fund has exchange privileges with the following Federated Funds:

American Leaders Fund, Inc., Capital Growth Fund (Class A Shares and Class C
Shares only); Federated Bond Fund; Federated Small Cap Strategies Fund;
Federated International Income Fund; Federated Limited Term Fund (Class A Shares
only); Federated Limited Term Municipal Fund (Class A Shares only); Federated
Strategic Income Fund; Federated World Utility Fund; Fund for U.S. Government
Securities, Inc.; Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.; Michigan Intermediate Municipal
Trust (Class A Shares only); Pennsylvania Municipal Income Fund (Class A Shares
only); Tax-Free Instruments Trust (Class A Shares only).

Prospectuses for these funds are available by writing to Federated Securities
Corp.

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 funds in the 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.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in 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 on the circumstances, a short-term or long-term capital
gain or loss may be realized.

MAKING AN EXCHANGE

Instructions for exchanges for certain 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 Services Company, 500
Victory Road--2nd Floor, Quincy, Massachusetts 02171.

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. Telephone redemption
instructions may be recorded. 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 Services Company, P.O. Box 8600, Boston, Massachusetts
02266-8600, and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions may be 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 not receive any dividend that
is payable to shareholders of record on that date. This privilege may be
modified or terminated at any time.

- -------------------------------------------------------
REDEEMING CLASS A 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. Redemptions can be made through a financial institution or directly
from the Fund. Redemption requests must be received in proper form and may be
made as described below.

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 wire transferred 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 been 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 redemption instructions may 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 by Mail" should be considered. If at any time the Fund
shall determine it necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.

SIGNATURES

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.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.

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. 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.

CONTINGENT DEFERRED SALES CHARGE

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, as amended, of
a 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; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. 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 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, as amended, 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

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

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Annual confirmations are sent to report dividends paid during the
year.

DIVIDENDS

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares on the payment date, at the ex-dividend date net asset value without a
sales charge, unless shareholders request cash payments on the new account form
or by writing to 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. A portion of distributions to shareholders could
under some circumstances, be reclassified as a return of capital for income tax
purposes (see "Federal Income Tax").

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

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

INTERNATIONAL SERIES, INC.
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

ADVISORY FEES
The Adviser receives an annual investment advisory fee equal to 0.75% 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 many mutual funds with similar objectives and policies. The Adviser may
voluntarily waive a portion of its fee. The Adviser can terminate this voluntary
waiver at any time at its sole discretion. The Adviser has also undertaken to
reimburse the Fund for operating expenses in excess of limitations established
by certain states.

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 John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son,
J. Christopher Donahue, who is President and Trustee of Federated Investors.
Prior to September 1995, the Adviser had not served as an investment adviser to
mutual funds.

by the Fund; prohibit purchasing securities in initial public offerings; and
prohibit taking profits on securities held for less than sixty days. Violations
of these codes are subject to review by the Board of Directors, and could result
in severe penalties.

Henry A. Frantzen has been the Fund's portfolio manager since September 1995.
Mr. Frantzen joined Federated Investors in 1995 as an Executive Vice President
of the Fund's investment adviser. Mr. Frantzen served as Chief Investment
Officer of international equities at Brown Brothers Harriman & Co. from 1992 to
1995. He was the Executive Vice President and Director of Equities at
Oppenheimer Management Corporation from 1989 to 1991. Mr. Frantzen received his
B.S. in finance and marketing from the University of North Dakota.

Drew J. Collins has been the Fund's portfolio manager since September 1995. Mr.
Collins joined Federated Investors in 1995 as a Senior Vice President of the
Fund's investment adviser. Mr. Collins served as a Vice President/Portfolio
Manager of international equity portfolios at Arnhold 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. Mr. Collins is a Chartered Financial Analyst and received his M.B.A. in
finance from the University of Pennsylvania.

Mark S. Kopinski has been the Fund's portfolio manager since September 1995. Mr.
Kopinski joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. Mr. Kopinski served as Vice President/Portfolio Manager of
international equity funds at Twentieth Century Mutual Funds from 1990 to 1995.
Mr. Kopinski received his M.B.A. in Asian Studies from the University of
Illinois.

Frank Semack has been the Fund's portfolio manager since September 1995. Mr.
Semack joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. Mr. Semack served as an Investment Analyst at Omega
Advisers, Inc. from 1993 to 1994. He served as an Associate Director/Portfolio
Manager of Wardley Investment Services, Ltd. from 1987 to 1993. Mr. Semack
received his M.Sc. in economics from the London School of Economics.

Alexandre de Bethmann has been the Fund's portfolio manager since September
1995. Mr. de Bethmann joined Federated Investors in 1995 as a Vice President of
the Fund's investment adviser. Mr. de Bethmann 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. Mr. de Bethmann received his
M.B.A. in Finance from Duke University.

DISTRIBUTION OF CLASS A SHARES

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 computed at
an annual rate of up to .25 of 1% of the average daily net assets for the Shares
to finance any activity which is principally intended to result in the sale of
Shares subject to the Distribution Plan. 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.

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 1% of the average daily net asset value
of the 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.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS.

Federated Securities Corp. will pay financial institutions, at the time of
purchase of the Shares, an amount equal to .50 of 1% of the net asset value of
the 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.)

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 Fund's Adviser or its
affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

aggregate daily net assets of all Federated Funds.
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ASSETS OF THE FEDERATED
ADMINISTRATIVE FEE FUNDS
<C> <S>
.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
</TABLE>

BROKERAGE TRANSACTIONS

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

SHAREHOLDER INFORMATION

VOTING RIGHTS

Each Share 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 Corporation have equal voting rights, except that in matters
affecting only a particular fund or class, only shares of that particular fund
or class are entitled to vote.

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

TAX INFORMATION

FEDERAL INCOME TAX

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 IRA or qualified retirement plan until distributed.

Quarterly distributions from the Fund are based on estimates of book income for
the year. Tax basis income includes gains or losses attributable to currency
fluctuation, whereas book income generally consists solely of the coupon income
generated by the portfolio. Due to differences in the book and tax treatment of
fixed incomes securities denominated in foreign currencies, it is difficult to
project currency effects on an interim basis. Therefore, to the extent that
currency fluctuations can not 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.

STATE AND LOCAL TAXES

Fund 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, including treatment of
distributions as income or return of capital.

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

PERFORMANCE INFORMATION

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

Total return represents the change, over a specified 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
Shares over a thirty-day period by the maximum offering price per Share of Class
A Shares 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 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.

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

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

OTHER CLASSES OF SHARES

Class B Shares are sold primarily to customers of financial institutions,
subject to a maximum contingent deferred sales charge of 5.50% and a Rule 12b-1
fee of up to .75 of 1%. In addition, Class B Shares are subject to a shareholder
services fee of up to .25 of 1% of the Class B Shares' average daily net assets.
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 load. Class C Shares are distributed pursuant
to a Distribution Plan adopted by the Fund whereby the distributor is paid a fee
of up to 0.75 of 1%. Class C Shares are also subject to a shareholder services
fee of up to 0.25 of 1% 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.

The amount of dividends payable to Class A Shares will generally exceed that
payable to Class B Shares and Class C Shares by the difference between Class
Expenses and distribution and shareholder service expenses borne by shares of
each respective class.

The stated advisory fee is the same for all classes of shares.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated International Income Fund
Class A Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ---------------------------------------------------------------------------------------------------------------------------

FEDERATED INTERNATIONAL
INCOME FUND
(FORMERLY, INTERNATIONAL
INCOME FUND)
(A PORTFOLIO OF INTERNATIONAL
SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES

PROSPECTUS

An Open-End Management
Investment Company

Prospectus dated January 31, 1996

[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

CUSIP 46031P100
1051602A-A (1/96)

FEDERATED INTERNATIONAL INCOME FUND
(FORMERLY, INTERNATIONAL INCOME FUND)
A PORTFOLIO OF INTERNATIONAL SERIES, INC.
(FORMERLY, FT 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 Income Fund (the "Fund"), a portfolio of
International Series, Inc. (the "Corporation") dated January 31, 1996. This
Statement is not a prospectus. You may request a copy of a prospectus or a
paper copy of this Statement of Additional Information, if you have received
it electronically, free of charge by calling 1-800-235-4669.

Statement dated January 31, 1996

FEDERATED SECURITIES CORP.
Distributor
A Subsidiary of FEDERATED INVESTORS

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

GENERAL INFORMATION ABOUT THE FUND
1

INVESTMENT OBJECTIVES AND POLICIES
1

Types of Investments and
Investment Techniques 1
When-Issued and Delayed Delivery
Transactions13
Repurchase Agreements 14
Reverse Repurchase Agreements 14
Lending Portfolio Securities 15
Restricted and Illiquid
Securities 15
Duration 16
Additional Risk Considerations17
Portfolio Turnover 17
INVESTMENT LIMITATIONS 18

INTERNATIONAL SERIES, INC.
MANAGEMENT 22

Fund Ownership 31
Directors Compensation 32
INVESTMENT ADVISORY SERVICES 34

Adviser to the Fund 34
Advisory Fees 34
BROKERAGE TRANSACTIONS 36

OTHER SERVICES 37

Fund Administration 37
Custodian and Portfolio
Recordkeeper 37
Transfer Agent 37
Independent Public Accountants37
PURCHASING SHARES 37

Distribution Plan and Shareholder
Services 38
Conversion to Federal Funds 39
Purchases by Sales
Representatives, Directors of
the Corporation, and
Employees 39
DETERMINING NET ASSET VALUE 39

Determining Market Value of
Securities 39
Trading in Foreign Securities 40
REDEEMING SHARES 40

Redemption in Kind 41
TAX STATUS 42

The Fund's Tax Status 42
Foreign Taxes 42
Shareholders' Tax Status 43
TOTAL RETURN 43

YIELD 44

PERFORMANCE COMPARISONS 44

ABOUT FEDERATED INVESTORS 46

Mutual Fund Market 47
Institutional Clients 47
Trust Organizations 47
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 47
FINANCIAL STATEMENTS 48

APPENDIX 48

GENERAL INFORMATION ABOUT THE FUND

The Fund is a portfolio in International Series, Inc. (the "Corporation"),
which was established as FT International Trust, a Massachusetts business
trust, under a Declaration of Trust dated March 9, 1984, and reorganized as a
corporation under the laws of the state of Maryland on February 11, 1991. At a
special meeting of shareholders held on March 15, 1994, the shareholders of the
Corporation approved an amendment to the Articles of Incorporation to change
the name of the Corporation from FT Series, Inc., to International Series, Inc.
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 OBJECTIVES AND POLICIES

The Fund's investment objective is to seek a high level of current income in
U.S. Dollars consistent with prudent investment risk. The Fund has a secondary
objective of capital appreciation. The investment objectives of the Fund cannot
be changed without the approval of the shareholders.
TYPES OF INVESTMENTS AND INVESTMENT TECHNIQUES
GENERAL
The Fund will invest primarily in high-quality debt securities denominated
in foreign currencies in accordance with the Fund's investment objectives
and policies. The Fund intends to engage in forward contracts, futures and
options transactions whenever it appears to Federated Global Research
Corp., the Fund's investment adviser (the "Adviser") (a) to be
advantageous to do so in pursuing the Fund's investment objectives; (b) to
hedge (i.e., protect) against foreign currency and interest rate risks;
and (c) to stabilize the value of the Fund's assets. The Fund will not
engage in such transactions for speculation. Up to 10% of the Fund's total
assets may be invested at any one time in commercial paper, certificates

of deposit or repurchase agreements. The use of forward contracts, futures
and options, and the attendant benefits and possible risks of such
transactions, are discussed below along with certain other investment
information.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
order to protect itself 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 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.
There is no limitation as to the percentage of the Fund's assets that may
be committed to such contracts. The Fund does not enter into forward
foreign currency exchange contracts or maintain a net exposure in such
contracts when the Fund would be obligated to deliver an amount of foreign
currency in excess of the value of the Fund's 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 Adviser believes
will tend to be closely correlated with that currency with regard to price
movements. Generally, the Fund does 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 falls 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 were 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
additional 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
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 subject to significant price and rate movements.

FUTURES CONTRACTS
The Fund may enter into contracts for the future delivery of a financial
instrument such as an amount of foreign currency, a security, or the cash
value of a securities index during a specified future period at a
specified price. This investment technique is designed primarily to hedge
against anticipated future changes in foreign exchange rates, interest
rates or market conditions, all of which might otherwise have an adverse
effect upon the value of securities or other assets which the Fund holds
or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the underlying foreign
currency, security or cash value of a securities index called for by the
contract at a specified price during a specified delivery period. A
"purchase" of a futures contract means the undertaking of a contractual
obligation to acquire the underlying foreign currency, security or cash
value of a securities index at a specified price during a specified
delivery period. At the time of delivery, in the case of fixed income
securities pursuant to the contract, adjustments are made to recognize
differences in value resulting from the delivery of securities with a
different interest rate than the rate specified in the contract. In some
cases, securities called for by a futures contract may not have been
issued at the time the contract was written.
Although some futures contracts by their terms call for the actual
delivery or acquisition of assets, in most cases a party will close out
the contractual commitment before delivery without having to make or take
delivery of the underlying assets by purchasing (or selling, as the case
may be) on a commodities exchange an identical futures contract calling
for delivery in the same month. Such a transaction, if effected through a
member of an exchange, cancels the obligation to make or take delivery of
the underlying assets. All transactions in the futures market are made,
offset or fulfilled through a clearing house associated with the exchange

on which the contracts are traded. Brokerage fees will be incurred by the
Fund when it purchases or sells contracts, and the Fund will be required
to maintain margin deposits. At the time the Fund enters into a futures
contract, it is required to deposit with its custodian, on behalf of the
broker, a specified amount of cash or eligible securities, called "initial
margin." The initial margin required for a futures contract is set by the
exchange on which the contract is traded. Subsequent payments, which are
called "variation margin," to and from the broker are made on a daily
basis as the market price of the futures contract fluctuates. The costs
incurred in connection with futures transactions could reduce the Fund's
return.
Futures contracts entail risks. If the Adviser's judgment about the
general direction of interest rates, markets or exchange rates is wrong,
the overall performance may be poorer than if no such contracts had been
entered into. An imperfect correlation may exist between movements in the
prices of futures contracts and portfolio assets being hedged. Further,
the market prices of futures contracts may be affected by certain factors.
For example, the normal relationship between the assets and futures
markets could be distorted if participants in the futures market were to
elect to close out their contracts through offsetting transactions rather
than by meeting margin requirements. Price distortions also could result
if investors in futures contracts were to decide to make or take delivery
of underlying assets rather than engaging in closing transactions because
of the resultant liquidity of the futures market. Further, increased
participation by speculators in the futures market could cause temporary
price distortions because, as perceived by speculators, margin
requirements in the futures market are less onerous than margin
requirements in the cash market. Because of the possibility of price
distortions in the futures market and the imperfect correlation between
movements in the prices of securities or other assets and movements in the

prices of futures contracts, a correct forecast of market trends by the
Adviser still may not result in a successful hedging transaction. If one
of these events were to occur, the Fund could lose money on the futures
contracts as well as on its portfolio assets.
OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write call and put options on futures contracts.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract at a
specified price at any time during the period of the option. When the
option is exercised, the writer of the option delivers the futures
contract to the holder at the exercise price. With regard to put and call
options on futures contracts written by the Fund, the Fund would be
required to deposit initial and maintenance margin with the custodian.
Options on futures contracts involve risks similar to those discussed
above that relate to transactions in futures contracts. Furthermore, an
option on a futures contract purchased by the Fund may expire worthless,
which would cause the Fund to lose the premium paid for the option.
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
foreign 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 Adviser opinion, 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.
OPTIONS ON SECURITIES
The Fund may write (sell) covered call options on securities if it owns
securities that are acceptable for escrow purposes. Additionally, the Fund
may write secured put options on securities. When writing a secured put
option, the Fund will invest an amount not less than the exercise price of
the put option in eligible securities, so long as the Fund is obligated as
a writer of a put option. A call option gives the purchaser the right to
buy, and the writer the obligation to sell, the underlying security 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
security at the exercise price during the option period. The premium
received for writing an option will reflect such factors as the current

market price of the underlying security, the relationship of the exercise
price to such market price, the option period, supply and demand, and
interest rates. The exercise price of an option may be below, equal to or
above the current market value of the underlying security at the time that
the option is written. The Fund may also write or purchase spread options.
A spread option is an option for which the exercise price may be a fixed
dollar spread or yield spread between the security underlying the option
and another security that it does not own but uses as a bench mark.
The purchase of a put option by the owner of the related security protects
the purchaser against any decline in the related security's price below
the exercise price (less the amount paid for the option). The ability of
the Fund to purchase put options allows it to protect capital gains in an
appreciated security without actually requiring the Fund to sell the
appreciated security. On occasion, the Fund would like to establish a
position in a security upon which call options are available. The purchase
of a call option enables the Fund to fix the cost of acquiring the
security, which would be the cost of the call plus the exercise price of
the option. In addition, this method of acquiring securities provides some
protection from an unexpected downturn in the market. This is because the
Fund is at risk only for the amount of the premium paid for the call
option, which it can let lapse, if it so chooses.
During the option period, the covered call writer gives up the potential
for capital appreciation above the exercise price if the underlying asset
rises in value, and the secured put writer retains the risk of loss if the
underlying asset declines in value. For the covered call writer,
substantial appreciation in the value of the underlying asset would result
in the asset being "called away." For the secured put writer, substantial
depreciation in the value of the underlying asset could result in the
asset being "put to" the writer. If a covered call option expired
unexercised, the writer of the call would realize a gain and the buyer

would realize a loss in the amount of the premium. If the covered call
option writer had to sell the underlying asset because of the exercise of
the call option, it would realize a gain or loss from the sale of the
underlying asset, with the proceeds being increased by the amount of the
premium.
If a secured put option expired unexercised, the writer would realize a
gain and the buyer would realize a loss on the amount of the premium. If
the secured put writer would have to buy the underlying asset because of
the exercise of the put option, the writer would incur an unrealized loss
to the extent that the current market value of the underlying asset is
less than the exercise price of the put option, less the premium received.
OVER-THE-COUNTER OPTIONS
The Fund may deal in over-the-counter traded options ("OTC options") in
addition to exchange traded options. OTC options differ from exchange
traded options in several respects. First, they are transacted with
dealers rather than a clearing corporation. Second, a risk of
nonperformance by the dealer exists, whether as a result of the insolvency
of the dealer or otherwise, which could cause the Fund to experience
material losses; however, in writing OTC options, the premium is paid in
advance by the dealer. Third, in contrast to exchange traded options, OTC
options are available for a greater variety of securities and wider range
of expiration dates and exercise prices. Because there is no exchange in
the case of OTC options, pricing is normally done with reference to
information from market makers, which is carefully monitored by the Fund's
investment adviser and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily
only by entering into a closing transaction. In the case of OTC options,
there cannot be any assurance that a continuous liquid secondary market
will exist for any particular option at any given time. As a result, the
Fund may be able to realize the value of an OTC option it has purchased

only by exercising it or by entering into a closing sale transaction with
the dealer that issued it. Likewise, in cases where the Fund writes an OTC
option, it generally can close out that option prior to its expiration
only by entering into a closing purchase transaction with the dealer to
whom the Fund wrote the option. If a covered call option writer is unable
to effect a closing transaction, it cannot sell the underlying asset until
the option either expires or is exercised. Thus, a covered call option
writer of an OTC option may not be able to sell an underlying asset even
though it might otherwise be advantageous to do so. Moreover, a secured
put writer of an OTC option may be unable to sell the assets pledged to
secure the put for other investment purposes so long as it is obligated as
a put writer, and a purchaser of the put or call option might also find it
difficult to terminate its position on a timely basis when no secondary
market exists.
OPTIONS ON SECURITIES INDICES
The Fund also may purchase and write call and put options on securities
indices in order to hedge against market conditions which affect the
values of securities that the Fund owns or intends to purchase. The Fund
will not purchase and write such options for speculation. By writing and
purchasing index options, the Fund may be able to achieve many of the same
objectives as through the purchasing and writing of options on individual
securities. Options on securities indices are similar to options on
individual securities. However, unlike an option on an individual
security, which gives the right to take or make delivery of a security at
a specified price, an option on a securities index gives the holder upon
exercise the right to receive an amount of cash if the closing level of
the securities index upon which the option is based exceeds, in the case
of a call, or is less than, in the case of a put, the exercise price of
the option. Upon exercise of the option, the amount of cash received by
the holder is equal to the difference between the closing price of the

index and the exercise price of the option. In consideration for the
premium received, the writer of the option has an obligation to make
delivery of the amount of cash resulting from the exercise of the option.
Unlike options on individual securities, all settlements are in cash, and
the gain or loss depends upon price movements in the market generally or
in a segment of the market, rather than upon price movements in individual
securities.
The Fund covers call options written on a securities index through the
ownership of securities whose changes in price, in the opinion of the
Adviser, are anticipated to be similar to the price changes of the index,
or in such other manner or may be in conformance with applicable laws,
regulations and exchange rules. Any changes in the prices of the
securities owned by the Fund probably will not be perfectly correlated
with the securities index. The Fund will secure put options written on a
securities index by means of segregating liquid high-grade securities
equal to the exercise price, or in such other manner as may be in
conformance with applicable laws, regulations and exchange rules. Upon
writing an option on a securities index, the Fund will be required to
deposit with its custodian and mark-to-market, eligible securities that
are equal in value to at least 100% of the exercise price in the case of a
put or, in the case of a call, the value of the contract. Additionally, if
the Fund writes a call option on a securities index at a time when the
value of the contract is greater than the exercise price, the Fund will
segregate and mark to market, until such time as the option expires or is
closed out, cash or a cash equivalent equal in value to the excess of the
contract value.
In addition, the Fund may purchase and write options on other appropriate
indices, as available (e.g., foreign currency indices).
Index options involve risks similar to those associated with transactions
in futures contracts, as described above. Also, an option purchased by the

Fund may expire worthless. In such case, the Fund could lose the premium
paid for the option.
REGULATORY RESTRICTIONS
To the extent required to comply with Securities and Exchange Commission
("SEC") Release No. 10666, when purchasing a futures contract, writing a
put option or entering into a delayed delivery purchase or forward foreign
currency exchange purchase, the Fund will establish and maintain a
segregated account consisting of cash or liquid high-grade securities
equal to the value of such contracts.
To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid status as a "commodity pool operator",
the Fund will not enter into a futures contract, or purchase an option
thereon, if immediately thereafter the initial margin deposits for futures
contracts held by the Fund, plus premiums paid by it for open options of
futures, would exceed 5% of the total assets of the Fund. The Fund will
not engage in transactions in futures contracts or options thereon for
speculation, but only to attempt to hedge against changes in market
conditions affecting the values of assets which the Fund holds or intends
to purchase. When futures contracts or options thereon are purchased in
order to protect against a price increase on securities or other assets
intended to be purchased later, it is anticipated that at least 75% of
such intended purchases will be completed. When other futures contracts or
options thereon are purchased, the underlying value of such contracts will
at all times not exceed the sum of (1) accrued profit on such contracts
held by the broker; (2) cash or high-quality money market instruments set
aside in an identifiable manner; and (3) cash proceeds from investments
due in 30 days or less.
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.
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. 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 deemed by the 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 on the Fund's records at the trade date. These assets are marked
to market daily and maintained until the transaction is settled.
LENDING PORTFOLIO SECURITIES
The Fund may lend its portfolio securities 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 equal to at least 100% of the value of
the securities loaned.
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.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Directors to determine the liquidity of certain restricted
securities is permitted under a SEC Staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (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 Rule 144A. The Fund believes that the staff of the
SEC has left the question of determining the liquidity of all restricted
securities (eligible for resale under Rule 144A) for determination of the
Directors. The Directors consider the following criteria in determining the
liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealers' undertakings to make a market in the security; and
o the 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.
When the Fund invests in certain restricted securities determined by the
Directors to be liquid, such investments could have the effect of increasing
the level of Fund illiquidity to the extent that the buyers in the secondary
market for such securities (whether in Rule 144A resales or other exempt
transactions) become, for a time, uninterested in purchasing these securities.
DURATION
Duration is a measure of a debt security's price sensitivity expressed in years
and is a measure of the interest rate risk of a debt security, taking into
consideration that there may be cash flows before the maturity date and that
the cash flows must be considered in terms of their present value. Duration is
similar to, but more precise than, average life. It is a measure of the number
of years until the average dollar-in present value terms-is received from
coupon and principal payments. As such, it is one measure of systematic risk.

Average life, on the other hand, is a measure of the time to receive a dollar
of principal-it takes into consideration neither interest payments nor present
value. Duration is computed by multiplying each principal and interest payment
by its present value, summing these products, and dividing the sum by the full
price of the debt security. When a Fund invests in mortgage pass-through
securities, its duration will be calculated in a manner which requires
assumptions to be made regarding future principal prepayments. A more complete
description of this calculation is available upon request from the Fund.
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 Adviser, any
losses resulting from the holding of the Funds' 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 Adviser
believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may have
been held. The Adviser does not anticipate that portfolio turnover will result
in adverse tax consequences. For the fiscal years ended November 30, 1995 and
1994, the portfolio turnover rates were 41% and 136%, respectively.

INVESTMENT LIMITATIONS

ACQUIRING SECURITIES
The Fund will not acquire any securities of Fiduciary Trust Company
International or its affiliates.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of its total assets in securities
of any one government or supranational issuer.
BORROWING
The Fund will not borrow money except from banks or through reverse
repurchase agreements as a temporary measure for extraordinary or
emergency purposes and then only in amounts up to one-third of the value
of its total assets, including the amount borrowed, but entering into
futures contracts shall not be considered borrowing. This borrowing
provision is not for investment leverage but solely to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities would be
inconvenient or disadvantageous. The Fund will not purchase securities
while outstanding borrowings exceed 5% of the value of its total assets.
PLEDGING SECURITIES
The Fund will not mortgage, pledge, or hypothecate securities, except when
necessary for permissible borrowings. In those cases, it may pledge assets
having a value of 15% of its assets taken at cost. To comply with certain
state restrictions, the Fund will limit these transactions to 10% of its
net assets at market. If state restrictions change, this latter
restriction may be revised without shareholder approval or notification.
For purposes of the limitation, (a) the deposit of assets in escrow in
connection with the writing of covered call and secured put options and

(b) collateral arrangements with respect to (i) the purchase and sale of
options and (ii) initial or variation margins for futures contracts, will
not be deemed to be pledges of the Fund's assets.
BUYING ON MARGIN
The Fund will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for clearance of purchases and
sales of securities, and except that the Fund may make margin deposits or
payments in connection with its use of options, futures contracts and
options on futures contracts.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except in connection with
transactions described in other investment limitations or as required by
forward commitments to purchase securities or currencies.
UNDERWRITING
The Fund will not underwrite or participate in the marketing of securities
of other issuers, except as it may be deemed to be an underwriter under
federal securities law in connection with the disposition of its portfolio
securities.
INVESTING IN REAL ESTATE
The Fund will not invest in real estate, including limited partnership
interests, although it may invest in securities secured by real estate or
interests in real estate or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts,
except that the Fund may purchase or sell futures contracts and options
thereon, provided that the sum of its initial margin deposits on open
contracts will not exceed 5% of the fair market value of the Fund's net
assets. Further, the Fund may engage in transactions in foreign currencies

and may purchase and sell options on foreign currencies and indices for
hedging purposes.
LENDING CASH OR SECURITIES
The Fund will not lend any assets except portfolio securities. This shall
not prevent the purchase or holding of bonds, debentures, notes,
certificates of indebtedness, or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Fund's investment objective and policies or its Articles of Incorporation.
INVESTING IN MINERALS
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs or leases.
DEALING IN PUTS AND CALLS
The Fund may not write or purchase options, except that the Fund may write
covered call options and secured put options on up to 25% of its net
assets and may purchase put and call options, provided that no more than
5% of its net assets may be invested in premiums of such options.
SELLING SHORT
The Fund will not sell securities short unless (1) it owns, or has a right
to acquire, an equal amount of such securities, or (2) it has segregated
an amount of its other assets equal to the lesser of the market value of
the securities sold short or the amount required to acquire such
securities. The segregated amount will not exceed 10% of the Fund's net
assets. While in a short position, the Fund will retain the securities,
rights, or segregated assets.
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Except as noted, shareholders will be
notified before any material change in these limitations becomes effective.

PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own securities of open-end investment companies, own
more than 3% of the total outstanding voting stock of any closed-end
investment company, invest more than 5% of its total assets in any closed-
end investment company, or invest more than 10% of its total assets in
closed-end investment companies in general. The Fund will purchase
securities of closed-end investment companies only in openmarket
transactions involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets. The Fund will
indirectly bear its proportionate share of any fees and expenses paid by
other investment companies in addition to the fees and expenses payable
directly by the Fund.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including securities not determined by the Directors
to be liquid, repurchase agreements with maturities longer than seven days
after notice, and certain over-the-counter options.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS OF
THE CORPORATION
The Fund will not purchase or retain the securities of any issuer if the
officers and directors of the Corporation or the Fund's investment adviser

or sub-adviser owning individually more than -1/2 of 1% of the issuer's
securities together own more than 5% of the issuer's securities.
ARBITRAGE TRANSACTIONS
To comply with certain state restrictions, the Fund will not enter into
transactions for the purpose of engaging in arbitrage. If state
requirements change, this restriction may be revised without shareholder
notification.
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.
To comply with registration requirements in certain states, the Fund (1) will
limit short sales of securities of any class of any one issuer to the lesser of
2% of the Fund's net assets or 2% of the securities of that class, and (2) will
make short sales only on securities listed on recognized stock exchanges. The
latter restrictions, however, do not apply to short sales of securities the
Fund holds or has a right to acquire without the payment of any further
consideration. If state requirements change, these restrictions may be revised
without shareholder notification.
The Fund did not borrow money, invest in reverse repurchase agreements, pledge
securities in excess of 5% of the value of its total assets or sell securities
short in an amount exceeding 5% of its net assets, during the past year and
does not anticipate doing so during the current fiscal year.

INTERNATIONAL SERIES, INC. MANAGEMENT

OFFICERS AND DIRECTORS ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH INTERNATIONAL SERIES, INC., AND PRINCIPAL OCCUPATIONS.

John F. Donahue@*
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, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company .

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director

President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111

Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, 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, Trustee, or Managing General Partner of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.

Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.

Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.

J. Christopher Donahue
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 Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Executive Vice President of the
Funds; Director, Trustee, or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Director of the
Corporation.

Edward C. Gonzales
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 Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary

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 Services Company; President and Trustee, Federated Shareholder
Services; Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice 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.

David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; 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 of Directors between
meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; 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: 3-5 Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insurance Management
Series; Intermediate Municipal Trust; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund,
Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters Funds;
RIMCO Monument Funds; The Shawmut Funds; Star Funds; The Starburst Funds; The

Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust For Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding Shares.
As of January 9, 1996, the following shareholders of record owned 5% or more of
the outstanding Class A Shares of the Fund: Clooney and Company, New York, New
York, owned approximately 1,029,274 Class A Shares (6.81%); JATO, National City
Bank Minneapolis, Minneapolis, Minnesota, owned approximately 2,244,305 Class A
Shares (14.85%); Charles Schwab and Company, Inc., San Francisco, California,
owned approximately 1,608,062 Class A Shares (10.64%); and North Central Trust
Company, Lacrosse Wisconsin, owned approximately 967,012 Class A Shares
(6.40%).
As of January 2, 1996, the following shareholders of record owned 5% or more of
the outstanding Class B Shares of the Fund: Merrill Lynch Pierce Fenner &
Smith, Jacksonville, Florida, owned approximately 8,150 Class B Shares (7.13%);
International Society of Nephrology, Gainsville, Florida, owned approximately
6,000 Class B Shares (5.25%); Donaldson Lufkin Jenrette Securities Corporation,
Inc., Jersey City, New Jersey, owned approximately 6,154 Class B Shares
(5.38%); and Prudential Securities for the benefit of Joanne L. Wood, Beverly
Hills, California, owned approximately 9,376 Class B Shares (8.20%).
As of January 2, 1996, the following shareholder of record owned 5% or more of
the outstanding Class C Shares of the Fund: Merrill Lynch Pierce Fenner & Smith
(as record owner holding Class C Shares for its clients), Jacksonville,
Florida, owned approximately 731,628 Class C Shares (67.86%) 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.

DIRECTORS COMPENSATION

AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO DIRECTORS FROM
POSITION WITH FROM THE THE CORPORATION
THE CORPORATIONCORPORATION *# AND FUND COMPLEX +

John F. Donahue, $0 $0 for the Corporation and
Chairman and Director 54 other investment companies in the
Fund Complex

Thomas G. Bigley, ++ $697.00 $86,331 for the Corporation and
Director 54 other investment companies in the
Fund Complex

John T. Conroy, Jr., $756.00 $115,760 for the Corporation and
Director 54 other investment companies in the
Fund Complex

William J. Copeland, $756.00 $115,760 for the Corporation and
Director 54 other investment companies in the
Fund Complex

James E. Dowd, $756.00 $115,760 for the Corporation and
Director 54 other investment companies in the
Fund Complex

Lawrence D. Ellis, M.D., $697.00 $104,898 for the Corporation and
Director 54 other investment companies in the
Fund Complex

Edward L. Flaherty, Jr. $756.00 $115,760 for the Corporation and
Director 54 other investment companies in the
Fund Complex

Peter E. Madden, $697.00 $104,898 for the Corporation and
Director 54 other investment companies in the
Fund Complex

Gregor F. Meyer, $697.00 $104,898 for the Corporation and
Director 54 other investment companies in the
Fund Complex

John E. Murray, Jr. $697.00 $104,898 for the Corporation and
Director 54 other investment companies in the
Fund Complex

Wesley W. Posvar, $697.00 $104,898 for the Corporation and
Director 54 other investment companies in the
Fund Complex

Marjorie P. Smuts, $697.00 $104,898 for the Corporation and
Director 54 other investment companies in the
Fund Complex

* Information is furnished for the fiscal year ended November 30, 1995.

#The aggregate compensation is provided for the Corporation which is comprised
of 2 portfolios.
+ The information is provided for the last calendar year.
++ Mr. Bigley served on 39 investment companies in the Federated Funds Complex
from January 1 through September 30, 1995. In October 1, 1995, he was
appointed a Trustee on 15 additional Federated Funds.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
Prior to September 1, 1995, the Fund's investment adviser was Federated
Management. Effective September 1, 1995 the Fund's investment adviser is
Federated Global Research Corp. It is a subsidiary of Federated Investors. All
the voting securities of Federated Investors are owned by a trust, the trustees
of which are John F. Donahue, his wife, and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Fund, the Corporation, 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 the prospectus. For the period from September 1, 1995 to
November 30, 1995, Federated Global Research Corp. received $ 353,494, of which
$67,261 was waived because of undertakings to limit the Fund's expenses. For
the period from December 1, 1994 to August 31, 1995, Federated Management
received $1,105,820, of which $118,246 was waived because of undertakings to
limit the Fund's expenses. For the period from March 15, 1994 to November 30,

1994, Federated Management, the Fund's former investment adviser, received
$1,281,997, of which $172,142 was waived because of undertakings to limit the
Fund's expenses. For the period from December 1, 1993 to March 14, 1994,
Fiduciary Trust International Limited, the Fund's former investment adviser,
received $537,219, of which $60,480 was waived because of undertaking to limit
the Fund's expenses. For the fiscal year ended November 30, 1993, Fiduciary
Trust International Limited received $986,055, which was reduced by $271,710
because of undertakings to limit the Fund's expenses.
STATE EXPENSE LIMITATIONS
The Adviser and sub-adviser have undertaken to comply with the expense
limitations established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory and sub-advisory
fees, but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2-1/2% per year of the first $30 million of
average net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets, the
Adviser and sub-adviser will reimburse the Fund for their expenses over
the limitation.
If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory and sub-advisory fees paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amounts to be reimbursed by the Adviser and
sub-adviser will be limited, in any single fiscal year, by the amount of
the investment advisory and sub-advisory fee.
This arrangement is not part of the investment advisory contract or sub-
advisory agreement, and may be amended or rescinded in the future.

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. 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 fiscal
years ended November 30, 1995, 1994, and 1993, the Fund did not pay any
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.
OTHER SERVICES

FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the fiscal years ended November 30, 1995,
1994, and 1993, Federated Administrative Services earned $271,797, $334,436,
and $197,211, respectively. Dr. Henry J. Gailliot, an officer of Federated
Global Research Corp., the Adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee based
on size, type, and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
PURCHASING SHARES

Except under certain circumstances described in the prospectus, Shares are
sold at their net asset value, plus a sales load (for Class A Shares only) on

days the New York Stock Exchange is open for business. The procedure for
purchasing Shares is explained in the 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 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 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 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 objective. By identifying potential
investors whose needs are served by the Fund's objective, 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 fiscal year ended November 30, 1995, payments in the amount of
$463,225, $4,210 and $65,430, were made pursuant to the Distribution Plan for
Class A Shares, Class B Shares and Class C Shares, respectively, of which

$321,662, $0 and $0 were waived for Class A Shares, Class B Shares and Class C
Shares, respectively. In addition, for the fiscal year ended November 30, 1995,
payments in the amount of $463,225, $1,403 and $21,810 were made pursuant to
the Shareholder Services Agreement for Class A Shares, Class B Shares and Class
C Shares, respectively, of which $240,467, $0 and $3,290 were 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 OF THE CORPORATION, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, the Adviser, 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 Shares at net asset value without a sales load.
Shares may also be sold without sales loads to trusts or pension or profit-
sharing plans for these persons.
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

o according to the prices provided by an independent pricing service, if
available, or at fair value as determined in good faith by the Directors;
or
o for 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.
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 after the Fund
receives the redemption request. Shareholder redemptions may be subject to a

contingent deferred sales charge. Redemption procedures are explained in the
prospectus under "How to Redeem Shares." Although the Fund 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
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 institutions 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 Fund's portfolio. 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 a class of
Shares' net asset value during any 90-day period. Any redemption beyond this
amount will also be in cash unless the Directors determine that further cash
payments will have a materially adverse effect on remaining shareholders. 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 will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Directors determine to be fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
is 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.
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:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities held
less than three months;
o invest in securities within certain statutory limits; and
o distribute 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 average annual total returns for Class A Shares for the fiscal year
ended November 30, 1995 and for the period from June 4, 1991 (date of initial
public investment) to November 30, 1995, were 10.85% and 10.19%, respectively.
The Fund's average annual total returns for Class B Shares for the fiscal year
ended November 30, 1995 and for the period from September 28, 1994 (start of
performance) to November 30, 1995, were 9.40% and 10.97%, respectively.
The Fund's average annual total returns for Class C Shares for the fiscal year
ended November 30, 1995 and for the period from April 1, 1993 (start of
performance) to November 30, 1995, were 14.30% and 12.18%, respectively.
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 offering price 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 on Class A Shares, 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 offering price of Shares redeemed. Occasionally, total return
which does not reflect the effect of the sales load may be quoted in
advertising.
YIELD

The yield for Class A Shares for the thirty-day period ended November 30, 1995,
was 5.95%.
The yield for Class B Shares for the thirty-day period ended November 30, 1995,
was 5.41%.
The yield for Class C Shares for the thirty-day period ended November 30, 1995,
was 5.43%.
The yield for all classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the SEC) earned by any class of
Shares over a thirty-day period by the maximum offering price per Share of any
class of Shares on the last day of the period. This value is then 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 any class of Shares because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to 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 Fund's performance of each class of Shares depends upon such variables as:
.portfolio quality;

o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in the Fund's or a class of Shares' expenses; and
o various 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 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:
o LIPPER ANALYTICAL SERVICES, INC., for example, makes comparative
calculations for one-month, three-month, one-year, and five-year periods
which assume the reinvestment of all capital gains distributions and
income dividends.
o SALOMON BROTHERS HIGH GRADE BOND INDEX; SALOMON BROTHERS WORLD GOVERNMENT
BOND INDEX; AND J.P. MORGAN GOVERNMENT BOND INDEX.
o 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.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is comprised of
approximately 5,000 issues which include non-convertible bonds publicly

issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi-federal corporations; and publicly
issued, fixed rate, non-convertible domestic bonds of companies in
industry, public utilities, and finance. The average maturity of these
bonds approximates nine years. Tracked by Lehman Brothers, Inc., the index
calculates total returns for one-month, three-month, twelve-month, and
ten-year periods and year-to-date.
Advertisements and sales literature for all three classes 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 load or contingent deferred sales charge, as applicable.
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.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.

MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*

* Source: Investment Company Institute
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
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
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 Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.

FINANCIAL STATEMENTS

The Financial Statements for the fiscal year ended November 30, 1995, are
incorporated herein by reference to the Annual Report of the Fund dated
November 30, 1995 (File Nos. 2-91776 and 811-3984). A copy of the Report may be
obtained without charge by contacting the Fund.

APPENDIX

MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
P-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:
o Leading market positions in well established industries;
o High rates of return on funds employed;
o Conservative capitalization structures with moderate reliance on debt and
ample asset protection;
o Broad margins in earning coverage of fixed financial charges and high
internal cash generation; and
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1-This highest category 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.
MOODY'S 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
edge.'' 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 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.
STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATING DEFINITIONS
AAA-Debt rated AAA has the highest rating assigned by S&P. 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.
Cusip 46031P100
Cusip 46031P506
Cusip 46031P209

FEDERATED INTERNATIONAL EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)
(A PORTFOLIO OF INTERNATIONAL SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

PROSPECTUS

The shares of Federated International Equity Fund (the "Fund") represent
interests in a diversified investment portfolio of International Series, Inc.,
(formerly, FT Series, Inc.) (the "Corporation"), an open-end, management
investment company (a mutual fund). The Fund invests primarily in equity
securities of non-U.S. issuers to obtain a total return on its assets.

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

Prospectus dated January 31 1996

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

TABLE OF CONTENTS

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

Financial Highlights...........................................................4
General Information............................................................7

Risks Associated with Financial Futures
Contracts and Options on Financial
Futures Contracts........................................................14

Investment Limitations......................................................15

Net Asset Value...............................................................16

Investing in the Fund.........................................................16

How To Purchase Shares........................................................17
Investing in Class A Shares.................................................17
Subaccounting Services......................................................18

Investing in Class B Shares.................................................20

Investing in Class C Shares.................................................21
Special Purchase Features...................................................22

Exchange Privilege............................................................22

How To Redeem Shares..........................................................24
Special Redemption Features.................................................25
Contingent Deferred Sales Charge............................................26
Elimination of Contingent
Deferred Sales Charge....................................................27
Account and Share Information.................................................28

International Series, Inc.
Information.................................................................29

Management of the Corporation...............................................29
Distribution of Shares......................................................30
Administration of the Fund..................................................32
Brokerage Transactions......................................................32

Shareholder Information.......................................................33
Voting Rights...............................................................33

Performance Information.......................................................34

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

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

SUMMARY OF FUND EXPENSES
FEDERATED INTERNATIONAL EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)
<TABLE>
<S> <C> <C>
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................................................................................................ 1.00%
12b-1 Fee..................................................................................................... None
Total Other Expenses.......................................................................................... 0.64%
Shareholder Services Fee (after waiver) (2).................................................... 0.06%
Total Operating Expenses (3)......................................................................... 1.64%
</TABLE>

(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 of 1.00% for redemptions made
within one year of purchase. (See "Contingent Deferred Sales Charge").

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1996. The total
operating expenses were 1.57% for the fiscal year ended November 30, 1995
and would have been 1.75% absent the voluntary waiver of a portion of the
shareholder services fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class A Shares" and "International Series,
Inc. Information." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period............. $76 $104 $139 $239
You would pay the following expenses on the same investment, assuming no
redemption.................................................................. $71 $104 $139 $239
</TABLE>

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 EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)
<TABLE>
<S> <C> <C>
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................................................................................................ 1.00%
12b-1 Fee..................................................................................................... 0.75%
Total Other Expenses.......................................................................................... 0.83%
Shareholder Services Fee....................................................................... 0.25%
Total Operating Expenses (2) (3)..................................................................... 2.58%
</TABLE>

(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").

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

(3) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1996. The total
operating expenses were 2.52% for the fiscal year ended November 30, 1995.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class B Shares" and "International Series,
Inc. 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.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period............. $82 $123 $160 $291
You would pay the following expenses on the same investment, assuming no
redemption.................................................................. $26 $80 $137 $291
</TABLE>

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 EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)
<TABLE>
<S> <C> <C>
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................................................................................................ 1.00%
12b-1 Fee..................................................................................................... 0.75%
Total Other Expenses.......................................................................................... 0.79%
Shareholder Services Fee (after waiver) (2).................................................... 0.21%
Total Operating Expenses (3)......................................................................... 2.54%
</TABLE>

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1996. The total
operating expenses were 2.46% for the fiscal year ended November 30, 1995
and would have been 2.50% absent the voluntary waiver of a portion of the
shareholder services fee.

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.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period............. $36 $79 $135 $288
You would pay the following expenses on the same investment, assuming no
redemption.................................................................. $26 $79 $135 $288
</TABLE>

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 EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated January 12, 1996, on the
Fund's financial statements for the year ended November 30, 1995, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free from charge.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989 1988
Net asset value, beginning of
period $ 18.53 $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34 $ 19.99
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.09 0.15 0.06 0.10 0.11 0.19 0.18 0.19
- -----------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.17 1.96 2.53 (0.37) 0.37 (1.16) 1.60 3.27
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment operations 0.26 2.11 2.59 (0.27) 0.48 (0.97) 1.78 3.46
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.003) (0.07) (0.06) (0.08) (0.21) (0.20) (0.23) (0.23)
- -----------------------------------
Distributions in excess of net
investment income(a) -- -- (0.13) -- -- -- -- --
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions from net
investment income (0.003) (0.07) (0.19) (0.08) (0.21) (0.20) (0.23) (0.23)
- -----------------------------------
Distributions from net realized
gain on investments and foreign
currency transactions (0.90) -- -- -- (0.11) (2.14) (1.30) (5.88)
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.90) (0.07) (0.19) (0.08) (0.32) (2.34) (1.53) (6.11)
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.89 $ 18.53 $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN(B) 1.60% 12.82% 18.52% (1.86%) 3.49% (6.72%) 11.55% 24.33%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 1.57% 1.61% 1.60% 1.57% 1.52% 1.32% 1.01% 1.00%
- -----------------------------------
Net investment income 0.42% -- 0.13% 0.69% 0.78% 1.39% 1.04% 1.43%
- -----------------------------------
Expense waiver/reimbursement(c) 0.18% -- 0.01% 0.02% 0.30% 0.25% 0.46% 0.28%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period
(000 omitted) $191,911 $261,178 $192,860 $106,937 $101,980 $82,541 $65,560 $68,922
- -----------------------------------
Portfolio turnover 166% 73% 74% 91% 84% 114% 85% 98%
- -----------------------------------

<CAPTION>
<S> <C> <C>
1987 1986
Net asset value, beginning of
period $ 22.87 $ 14.62
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.24 0.04
- -----------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency (0.72) 8.63
- ----------------------------------- --------- ---------
Total from investment operations (0.48) 8.67
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.05) (0.08)
- -----------------------------------
Distributions in excess of net
investment income(a) -- --
- ----------------------------------- --------- ---------
Total distributions from net
investment income (0.05) (0.08)
- -----------------------------------
Distributions from net realized
gain on investments and foreign
currency transactions (2.35) (0.34)
- ----------------------------------- --------- ---------
Total distributions (2.40) (0.42)
- ----------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 19.99 $ 22.87
- ----------------------------------- --------- ---------
TOTAL RETURN(B) (2.70%) 60.75%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 1.00% 1.00%
- -----------------------------------
Net investment income 0.93% 0.34%
- -----------------------------------
Expense waiver/reimbursement(c) 0.17% 0.19%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period
(000 omitted) $85,860 $106,257
- -----------------------------------
Portfolio turnover 130% 70%
- -----------------------------------
</TABLE>

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

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

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

Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1995, which can be obtained
free of charge.

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

FINANCIAL HIGHLIGHTS--CLASS B SHARES
FEDERATED INTERNATIONAL EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report dated January 12, 1996, on the
Fund's financial statements for the year ended November 30, 1995, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free from charge.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C>
1995 1994(A)
]NET ASSET VALUE, BEGINNING OF PERIOD $ 18.50 $ 19.61
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) (0.08) (0.01)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.18 (1.10)
- --------------------------------------------------------------------------------------------------- --------- ---------
Total from investment operations 0.10 (1.11)
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments and foreign currency transactions (0.90) --
- --------------------------------------------------------------------------------------------------- --------- ---------
Total distributions (0.90) --
- --------------------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.70 $ 18.50
- --------------------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN (B) 0.68% (5.27%)
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Expenses 2.52% 2.59%*
- ---------------------------------------------------------------------------------------------------
Net investment income (0.52%) (0.88%)*
- ---------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) -- --
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $6,370 $1,214
- ---------------------------------------------------------------------------------------------------
Portfolio turnover 166% 73%
- ---------------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from September 19, 1994 (start of
business) to November 30, 1994.

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

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

Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1995, which can be obtained
free of charge.

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

FINANCIAL HIGHLIGHTS--CLASS C SHARES
FEDERATED INTERNATIONAL EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report dated January 12, 1996, on the
Fund's financial statements for the year ended November 30, 1995, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free from charge.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1995 1994 1993(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.30 $ 16.41 $ 14.88
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------
Net investment income (loss) (0.12) (0.05) (0.04)
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency
transactions 0.22 1.98 1.57
- ---------------------------------------------------------------------------------------- --------- --------- ---------
Total from investment operations 0.10 1.93 1.53
- ----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------
Distributions from net investment income (0.001) -- --
- ----------------------------------------------------------------------------------------
Distributions in excess of net investment income (b) -- (0.04) --
- ---------------------------------------------------------------------------------------- --------- --------- ---------
Total distributions from net investment income (0.001) (0.04) --
- ---------------------------------------------------------------------------------------- --------- --------- ---------
Distributions from net realized gain on investments and foreign currency transactions (0.90) -- --
- ---------------------------------------------------------------------------------------- --------- --------- ---------
Total distributions (0.90) (0.04) --
- ---------------------------------------------------------------------------------------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.50 $ 18.30 $ 16.41
- ---------------------------------------------------------------------------------------- --------- --------- ---------
TOTAL RETURN (C) 0.69% 11.75% 10.28%
- ----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------
Expenses 2.46% 2.55% 2.57%*
- ----------------------------------------------------------------------------------------
Net investment income (0.47%) (0.91%) (1.10%)*
- ----------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.04% -- 0.01%*
- ----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $7,146 $8,836 $2,852
- ----------------------------------------------------------------------------------------
Portfolio turnover 166% 73% 74%
- ----------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from March 31, 1993 (start of business)
to November 30, 1993.

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

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

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

Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1995, which can be obtained
free of charge.

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

GENERAL INFORMATION

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 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."

The Fund 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."

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

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The Fund's objective is to obtain a total return on its assets. The objective is
based on the premise that investing in non-U.S. securities provides three
potential benefits over investing solely in U.S. securities:

. the opportunity to invest in non-U.S. companies believed to have superior
growth potential;

. the opportunity to invest in foreign countries with economic policies or
business cycles different from those of the United States; and

. the opportunity to reduce portfolio volatility to the extent that securities
markets inside and outside the United States do not move in harmony.

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. The investment objective and policies may be changed by the
Directors without shareholder approval. Shareholders will be notified before any
material change in the objective or policies becomes effective.

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

The Fund invests primarily in non-U.S. securities. A substantial portion of
these will be equity securities of established companies in economically
developed countries. The Fund will invest at least 65%, and under normal market
conditions substantially all of its total assets, in equity securities
denominated in foreign currencies, including European Currency Units, of issuers
located in at least three countries outside of the United States and sponsored
or unsponsored American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs"), and European Depositary Receipts ("EDRs"), collectively, "Depositary
Receipts." 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 purchase options and
financial futures contracts.

EQUITY AND FIXED INCOME SECURITIES

At the date of this prospectus, the Fund has committed its assets primarily to
dividend-paying equity securities of established companies that appear to have
growth potential. However, as a temporary defensive position, the Fund may shift
its emphasis to fixed income securities, warrants, or other obligations of
foreign companies or governments, if they appear to offer potential higher
return. Fixed income securities include preferred stock, convertible securities,
bonds, notes, or other debt securities which are investment grade or higher.
However, in no event will the Fund invest more than 25% of its total assets in
the debt securities of any one foreign country.

The high-quality debt securities in which the Fund will invest will possess a
minimum credit rating of A as assigned by Standard & Poor's Ratings Group
("S&P") or A by Moody's Investors Service, Inc. ("Moody's"), or, if unrated,
will be judged by Federated Global Research Corp., the Fund's investment adviser
(the "Adviser"), to be of comparable quality. Because the average quality of the
Fund's portfolio investments should remain constantly between A and AAA, the
Fund will seek to avoid the adverse consequences that may arise for some debt
securities in difficult economic circumstances. Downgraded securities will be
evaluated on a case by case basis by the Adviser. The Adviser will

determine whether or not the security continues to be an acceptable investment.
If not, the security will be sold. A description of the ratings categories is
contained in the Appendix to the Statement of Additional Information.

The prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.

DEPOSITARY RECEIPTS

The Fund may invest in foreign issuers by purchasing sponsored or unsponsored
ADRs, GDRs, and EDRs. ADRs are depositary receipts typically issued by a United
States bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs and GDRs 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. Generally, Depositary
Receipts in registered form are designed for use in the United States securities
market and Depositary Receipts in bearer form are designed for use in securities
markets outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Ownership of unsponsored Depositary Receipts may not entitle
the Fund to financial or other reports from the issuer of the underlying
security, to which it would be entitled as the owner of sponsored Depositary
Receipts.

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.

MONEY MARKET INSTRUMENTS

The Fund may invest in U.S. and foreign short-term money market instruments,
including interest-bearing call deposits with banks, government obligations,
certificates of deposit, bankers' acceptances, commercial paper, short-term
corporate debt securities, and repurchase agreements. The commercial paper in
which the Fund invests will be rated A-1 by S&P or P-1 by Moody's. These
investments may be used to temporarily invest cash received from the sale of
Fund Shares, to establish and maintain reserves for temporary defensive
purposes, or to take advantage of market opportunities. Investments in the World
Bank, Asian Development Bank, or Inter-American Development Bank are not
anticipated.

REPURCHASE AGREEMENTS

OPTIONS AND FINANCIAL
FUTURES CONTRACTS

The Fund may purchase put and call options, financial futures contracts, and
options on financial futures contracts. In addition, the Fund may write (sell)
put and call options with respect to securities in the Fund's portfolio.

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 a future time. The seller's failure to
complete the transaction 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. Accordingly, the Fund may pay more/less than the
market value of the securities on the settlement date.

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.
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 on the Fund's records 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 the trade date and settlement date will vary between 24 hours and
30 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 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 Fund's assets denominated in that currency. No more than 30% of the
Fund's assets will be committed to forward contracts for hedging purposes at any
time. (This restriction does not include forward contracts entered into to
settle securities transactions.)

PUT AND CALL OPTIONS WITH RESPECT TO EQUITY SECURITIES

The Fund may purchase put and call options on its portfolio of securities. Put
and call options will be used as a hedge to attempt to protect securities which
the Fund holds, or will be purchasing, against decreases or increases in value.
The Fund is also authorized to write (sell) put and call options on all or any
portion of its portfolio of securities to generate income. The Fund may write
call options on securities either held in its portfolio or which it has the
right to obtain without payment of further consideration or for which it has
segregated cash in the amount of any additional consideration. In the case of
put options written by the Fund, the Corporation's custodian will segregate
cash, U.S. Treasury obligations, or highly liquid debt securities with a value
equal to or greater than the exercise price of the underlying securities.

The Fund is authorized to invest in put and call options that are traded on
securities exchanges. The Fund may also purchase and write over-the-counter
options ("OTC options") on portfolio securities in negotiated transactions with
the buyers or writers of the options since options on some of the portfolio
securities held by the Fund are not traded on an exchange. The Fund will
purchase and write OTC options only with investment dealers and other financial
institutions (such as commercial banks or savings associations) deemed
creditworthy by the Adviser.

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. Prior to exercise or expiration, an option position
can only be terminated by entering into a closing purchase or sale transaction.
This requires a secondary market on an exchange which may or may not exist for
any particular call or put option at any specific time. The absence of a liquid
secondary market also may limit the Fund's ability to dispose of the securities
underlying an option. The inability to close options also could have an adverse
impact on the Fund's ability to effectively hedge its portfolio.

FINANCIAL FUTURES AND OPTIONS
ON FINANCIAL FUTURES

The Fund may purchase and sell financial futures contracts to hedge all or a
portion of its portfolio securities against changes in interest rates or
securities prices. Financial futures contracts on securities call for the
delivery of particular securities at a certain time in the future. The seller of
the contract agrees to make delivery of the type of instrument called for in the
contract, and the buyer agrees to take delivery of the instrument at the
specified future time. A financial futures contract on a securities index does
not involve the actual delivery of securities, but merely requires the payment
of a cash settlement based on changes in the securities index.

The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value resulting from anticipated increases in market
interest rates or broad declines in securities prices.
When the Fund writes a call option on a financial futures contract, it is
undertaking the obligation of selling the financial futures contract at a fixed
price at any time during a specified period if the option is exercised.
Conversely, as a purchaser of a put option on a financial futures contract, the
Fund is entitled (but not obligated) to sell a financial futures contract at the
fixed price during the life of the option.
The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of securities
eligible for purchase by the Fund. The Fund will use these transactions to
attempt to protect its ability to purchase securities in the future at price
levels existing at the time it enters into the transactions. When the Fund
writes a put option on a futures contract, it is undertaking to buy a particular
futures contract at a fixed price at any time during a specified period if the
option is exercised. As a purchaser of a call option on a futures contract, the
Fund is entitled (but not obligated) to purchase a futures contract at a fixed
price at any time during the life of the option.

The Fund may not purchase or sell financial futures contracts or options on
financial futures contracts if, immediately thereafter, the sum of the amount of
initial margin deposits on the Fund's existing financial futures positions and
premiums paid for related options would exceed 5% of the fair market value of
the Fund's total assets, after taking into account the unrealized profits and
losses on those contracts it has entered into. When the Fund purchases financial
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the financial futures contracts (less any related
margin deposits), will be deposited in a segregated account with the Fund's
custodian to collateralize the position and, thereby, insure that the use of
such financial futures contracts is unleveraged.

RISK CONSIDERATIONS

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 diversifies its investments broadly among foreign countries,
including both developed and developing countries. At least three different
countries will always be represented. As of November 30, 1995, the portfolio
contained securities from issuers located primarily in Japan, the United
Kingdom, Germany, France, Switzerland, Hong Kong, and Australia. There are also
investments in several other countries.

The Fund occasionally takes advantage of the unusual opportunities for higher
returns available from investing in developing countries. As discussed in the
Statement of Additional Information, however, these investments carry
considerably more volatility and risk because they are associated with less
mature economies and less stable political systems.

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.

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 sales 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 the Fund
assets denominated in that 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.

FOREIGN COMPANIES

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

. less publicly available information about foreign companies;

. 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 companies;

. 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 foreign securities 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

SHORT SALES

The Fund intends to sell securities short from time to time, subject to certain
restrictions. A short sale occurs when a borrowed security is sold in
anticipation of a decline in its price. If the decline occurs, shares equal in
number to those sold short can be purchased at the lower price. If the price
increases, the higher price must be paid. The purchased shares are then returned
to the original lender. Risk arises because no loss limit can be placed on the
transaction. When the Fund enters into a short sale, assets, equal to the market
price of the securities sold short or any lesser price at which the Fund can
obtain such securities, are segregated on the Fund's records and maintained
until the Fund meets its obligations under the short sale.

RISKS ASSOCIATED WITH FINANCIAL FUTURES CONTRACTS AND OPTIONS ON FINANCIAL
FUTURES CONTRACTS

Financial futures contracts and options on financial futures contracts can be
highly volatile and could result in a reduction of the Fund's total return. The
Fund's attempt to use such investment devices for hedging purposes may not be
successful. Successful futures strategies require the ability to predict future
movements in securities prices, interest rates and other economic factors. When
the Fund uses financial futures contracts and options on financial futures
contracts as hedging devices, there is a risk that the prices of the securities
subject to the financial futures contracts and options on financial futures
contracts may not correlate perfectly with the prices of the securities in the
Fund. This may cause the financial futures contract and any related options to
react to market changes differently than the portfolio securities. In addition,
the Adviser could be incorrect in its expectations about the direction or extent
of market factors, such as interest rate, securities price movements, and other
economic factors. In these events, the Fund may lose money on the financial
futures contract or the options on financial futures contracts. It is not
certain that a secondary market for positions in financial futures
contracts or for options on financial futures contracts will exist at all times.
Although the Adviser will consider liquidity before entering into financial
futures contracts or options on financial futures contracts transactions, there
is no assurance that a liquid secondary market on an exchange will exist for any
particular financial futures contract or option on a financial futures contract
at any particular time. The Fund's ability to establish and close out financial
futures contracts and options on financial futures contract positions depends on
this secondary market. If the Fund is unable to close out its position due to
disruptions in the market or lack of liquidity, the losses to the Fund could be
significant.
INVESTMENT LIMITATIONS

The Fund will not:

. with respect to 75% of the value of its total assets, invest more than 5% of
the value of its total assets in the securities (other than securities issued
or guaranteed by the government of the United States or its agencies or
instrumentalities) of any one issuer;

. acquire more than 10% of the outstanding voting securities of any one issuer,
or acquire any securities of Fiduciary Trust Company International or its
affiliates;

. sell securities short except under strict limitations;

. borrow money or pledge securities except, under certain circumstances, the
Fund may borrow up to one-third of the value of its total assets and pledge
up to 15% of the value of those assets to secure such borrowings; nor

. permit margin deposits for financial futures contracts held by the Fund, plus
premiums paid by it for open options on financial futures contracts, to exceed
5% of the fair market value of the Fund's total assets, after taking into
account the unrealized profits and losses on those contracts.

. The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.

The Fund will not:

. invest more than 5% of its assets in warrants;
. own securities of open-end or closed-end investment companies, except under
certain circumstances and subject to certain limitations not exceeding 10% of
its total assets (the Fund will indirectly bear its proportionate share of any
fees and expenses paid by other investment companies in addition to the fees
and expenses payable directly by the Fund.);

. invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations;

. invest more than 15% of the value of its net assets in illiquid securities,
including securities not determined by the Directors to be liquid, including
repurchase agreements with maturities longer than seven days after notice and
certain OTC options; nor

. purchase put options on securities unless the securities or an offsetting call
option are held in the Fund's portfolio.

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

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 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. Certain purchases of Class A Shares are not subject to a
sales charge. See "Investing in Class A Shares." 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 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 12b-1 fee while Class A
Shares do not bear such a fee. 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

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:
<TABLE>
<CAPTION>
SALES DEALER
SALES CHARGE 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
<S> <C> <C> <C>
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%*
</TABLE>

*See sub-section entitled "Dealer Concession" below.

No sales charge is imposed for Class A Shares purchased through bank trust
departments, investment advisers 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 to
shareholders designated as Liberty Life Members. However, investors who purchase
Shares through a trust department, investment adviser, or retirement plan may be
charged an additional service fee by the institution. Additionally, no sales
charge is imposed for Class A Shares purchased through "wrap accounts" or
similar programs, under which clients pay a fee or fees for services.

Shareholders of record in the Fund on September 30, 1989, may purchase
additional Shares at net asset value, without a sales charge, except that a
sales charge will be imposed when the Shares are acquired in exchange for shares
of another fund in the Federated Funds.

DEALER CONCESSION

SUBACCOUNTING SERVICES

Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. Institutions holding Class A
Shares in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other services provided which may be
related to the ownership of Class A Shares. This prospectus should, therefore,
be read together with any agreement between the customer and the institution
with regard to the services provided, the fees charged for those services, and
any restrictions and limitations imposed. State securities laws may require
certain financial institutions such as depository institutions to register as
dealers.

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;
. signing a 13-month letter of intent;

. using the reinvestment privilege;

. purchases with proceeds from redemptions of unaffiliated investment companies;
or

. concurrent purchases.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

As shown in the table on page 18, 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
eliminated or reduced for purchases made at one time by a trustee or fiduciary
for a single trust estate or a single fiduciary account.

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 the 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

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 was not distributed by Federated Securities Corp. (This does not include
Shares which were or would be subject to a contingent deferred Sales charge upon
redemption.) 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.

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 eliminate or reduce the
sales charge after it confirms the purchases.
INVESTING IN CLASS B SHARES

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

PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION

Any 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 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 Services Company, c/o State Street
Bank and Trust Company, Boston, Massachusetts; Attention: 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 011000028. 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

Shares may be purchased by sending a check to: Federated Services Company, P.O.
Box 8600, Boston, Massachusetts 02266-8600. The check should be made payable to
Fund Name, Fund Class Name. Please include an account number
on the check. Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received) and Shares begin earning dividends the next day.

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
applicable sales charge. A shareholder may apply for participation in this
program through his financial institution or directly through the Fund.

RETIREMENT PLANS

Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, contact Federated Securities Corp. 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. To the extent that a 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. For more information, see
"Contingent Deferred Sales Charge."

CLASS C SHARES

The Fund has exchange privileges with the following Federated Funds:

American Leaders Fund, Inc., Capital Growth Fund (Class A Shares and Class C
Shares only); Federated Bond Fund; Federated Small Cap Strategies Fund;
Federated World Utility Fund; Fund for U.S. Government Securities, Inc.,
Federated International Income Fund; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Utility Fund, Inc.; Limited Term
Fund (Class A Shares only); Limited Term Municipal Fund (Class A Shares only);
Michigan Intermediate Municipal Trust (Class A Shares only); Pennsylvania
Municipal Income Fund (Class A Shares only); Strategic Income Fund and Tax-Free
Instruments Trust (Class A Shares only).

Prospectuses for these funds are available by writing to Federated Securities
Corp.

REQUIREMENTS FOR EXCHANGE

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

TELEPHONE INSTRUCTIONS

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

HOW TO REDEEM SHARES

REDEEMING SHARES THROUGH YOUR 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 wire transferred 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 been 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
Services Company, Fund Name, Fund Class, P.O. Box 8600, Boston, Massachusetts
02266-8600. 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.

Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.

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. 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:
<TABLE>
<CAPTION>
CONTINGENT
YEAR OF REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
<S> <C>
First 5.50%
Second 4.75%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seven and thereafter 0%
</TABLE>

CLASS C SHARES

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

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, as amended, of
a 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; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. 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 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, as amended, 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

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

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Annual confirmations are sent to report dividends paid during the
year.

DIVIDENDS

Dividends are declared and paid annually to all shareholders invested in the
Fund on the record date. Dividends are automatically reinvested in additional
Shares on the payment date, at the ex-dividend date net asset value without a
sales charge, unless shareholders request cash payments on the new account form
or by writing to 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

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

INTERNATIONAL
SERIES, INC. INFORMATION

MANAGEMENT OF THE CORPORATION

BOARD OF DIRECTORS

INVESTMENT ADVISER

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to 1.00% 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 many mutual funds with similar objectives and policies. The Adviser may
voluntarily waive a portion of its fee. The Adviser can terminate this voluntary
waiver at any time at its sole discretion. The Adviser has also undertaken to
reimburse the Fund for operating expenses in excess of limitations established
by certain states.

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 John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Prior to September 1995, the Adviser had not served as an
investment adviser to mutual funds.

Frank Semack has been the Fund's portfolio manager since September 1995. Mr.
Semack joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. He served as an Investment Analyst at Omega Advisers, Inc.
from 1993 to 1994. He served as an Associate Director/Portfolio Manager of
Wardley Investment Services, Ltd. from 1987 to 1993. Mr. Semack received his
M.Sc. in economics from the London School of Economics.

DISTRIBUTION PLAN (CLASS B SHARES AND CLASS C SHARES ONLY) AND SHAREHOLDER
SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), Class B Shares and Class C Shares will pay a
fee to the distributor in an amount computed at an annual rate of up to 0.75% 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. For
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 each class 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.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Corporation and the Fund. Federated
Administrative Services provides these at an annual rate which relates to the
average aggregate daily net assets of all Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE DAILY NET ASSETS
FEE OF THE FEDERATED FUNDS
<C> <S>
.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
</TABLE>

BROKERAGE TRANSACTIONS

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

SHAREHOLDER INFORMATION

VOTING RIGHTS

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

TAX INFORMATION

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended (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.

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

Fund 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 the total return for each class of
Shares.

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.

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

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

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated International Equity Fund
Class A Shares Federated Investors Tower
Class B Shares Pittsburgh, Pennsylvania 15222-3779
Class C Shares
- ---------------------------------------------------------------------------------------------------------------------------

FEDERATED INTERNATIONAL
EQUITY FUND

(FORMERLY, INTERNATIONAL
EQUITY FUND)
(A PORTFOLIO OF INTERNATIONAL
SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

PROSPECTUS

An Open-End, Diversified
Management Investment Company
January 31, 1996

[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Cusip 46031P308
Cusip 46031P605
Cusip 46031P407

FEDERATED INTERNATIONAL EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)
(A PORTFOLIO OF INTERNATIONAL SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES

PROSPECTUS

The Class A Shares of Federated International Equity Fund (the "Fund") represent
interests in a diversified investment portfolio of International Series, Inc.
(formerly, FT Series, Inc.) (the "Corporation"), an open-end, management
investment company (a mutual fund). The Fund invests primarily in equity
securities of non-U.S. issuers to obtain a total return on its assets.

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

Prospectus dated January 31, 1996

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

TABLE OF CONTENTS

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

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

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

Investment Information.........................................................4
Investment Objective.........................................................4
Investment Policies..........................................................4
Risk Associated with Financial
Futures Contracts and Options
on Financial Futures Contracts...........................................10
Investment Limitations......................................................11

Net Asset Value...............................................................12

Investing in Class A Shares...................................................12
Share Purchases.............................................................12
What Shares Cost............................................................13
Reducing or Eliminating the
Sales Charge.............................................................14
Systematic Investment Program...............................................16
Retirement Plans............................................................16
Subaccounting Services......................................................16

Exchange Privilege............................................................16
Eliminated or Reduced the
Sales Charge.............................................................16
Requirements for Exchange...................................................17
Tax Consequences............................................................17
Making an Exchange..........................................................17

Redeeming Class A Shares......................................................18
Through a Financial Institution.............................................18
Systematic Withdrawal Program...............................................19
Contingent Deferred Sales Charge............................................19
Elimination of Contingent Deferred
Sales Charge.............................................................20

Account and Share Information.................................................21

International Series, Inc. Information........................................22
Management of the Corporation...............................................22
Distribution of Class A Shares..............................................23
Administration of the Fund..................................................24
Brokerage Transactions......................................................24

Shareholder Information.......................................................25
Voting Rights...............................................................25

Tax Information...............................................................25
Federal Income Tax..........................................................25
State and Local Taxes.......................................................26

Performance Information.......................................................26

Other Classes of Shares.......................................................27

Addresses.....................................................................28

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

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee................................................................................................ 1.00%
12b-1 Fee..................................................................................................... None
Total Other Expenses.......................................................................................... 0.64%
Shareholder Services Fee (after waiver) (2).................................................... 0.06%
Total Operating Expenses (3)......................................................................... 1.64%
</TABLE>

(1) Class A Shares purchased with the proceeds of a redemption of shares of an
unaffiliated investment company purchased or redeemed with a sales load and
not distributed by Federated Securities Corp. may be charged a contingent
deferred sales charge of .50 of 1.00% for redemptions made within one year
of purchase. (See "Contingent Deferred Sales Charge".)

(2) The maximum shareholder services fee is 0.25%.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class A Shares" and "International Series
Inc. Information." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.............. $76 $104 $139 $239
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $71 $104 $139 $239
</TABLE>

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 EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated January 12, 1996, on the
Fund's financial statements for the year ended November 30, 1995, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
free from charge.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990 1989 1988
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.53 $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34 $ 19.99
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.09 0.15 0.06 0.10 0.11 0.19 0.18 0.19
- -----------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.17 1.96 2.53 (0.37) 0.37 (1.16) 1.60 3.27
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment operations 0.26 2.11 2.59 (0.27) 0.48 (0.97) 1.78 3.46
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.003) (0.07) (0.06) (0.08) (0.21) (0.20) (0.23) (0.23)
- -----------------------------------
Distributions in excess of net
investment income(a) -- -- (0.13) -- -- -- -- --
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions from net
investment income (0.003) (0.07) (0.19) (0.08) (0.21) (0.20) (0.23) (0.23)
- -----------------------------------
Distributions from net realized
gain on investments and foreign
currency transactions (0.90) -- -- -- (0.11) (2.14) (1.30) (5.88)
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.90) (0.07) (0.19) (0.08) (0.32) (2.34) (1.53 (6.11)
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.89 $ 18.53 $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN(B) 1.60% 12.82% 18.52% (1.86%) 3.49% (6.72%) 11.55% 24.33%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 1.57% 1.61% 1.60% 1.57% 1.52% 1.32% 1.01% 1.00%
- -----------------------------------
Net investment income 0.42% -- 0.13% 0.69% 0.78% 1.39% 1.04% 1.43%
- -----------------------------------
Expense waiver/reimbursement(c) 0.18% -- 0.01% 0.02% 0.30% 0.25% 0.46% 0.28%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period
(000 omitted) $191,911 $261,178 $192,860 $106,937 $101,980 $82,541 $65,560 $68,922
- -----------------------------------
Portfolio turnover 166% 73% 74% 91% 84% 114% 85% 98%
- -----------------------------------

<CAPTION>
<S> <C> <C>
1987 1986
NET ASSET VALUE, BEGINNING OF
PERIOD $ 22.87 $ 14.62
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.24 0.04
- -----------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency (0.72) 8.63
- ----------------------------------- --------- ---------
Total from investment operations (0.48) 8.67
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.05) (0.08)
- -----------------------------------
Distributions in excess of net
investment income(a) -- --
- ----------------------------------- --------- ---------
Total distributions from net
investment income (0.05) (0.08)
- -----------------------------------
Distributions from net realized
gain on investments and foreign
currency transactions (2.35) (0.34)
- ----------------------------------- --------- ---------
Total distributions (2.40) (0.42)
- ----------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 19.99 $ 22.87
- ----------------------------------- --------- ---------
TOTAL RETURN(B) (2.70%) 60.75%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 1.00% 1.00%
- -----------------------------------
Net investment income 0.93% 0.34%
- -----------------------------------
Expense waiver/reimbursement(c) 0.17% 0.19%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period
(000 omitted) $85,860 $106,257
- -----------------------------------
Portfolio turnover 130% 70%
- -----------------------------------
</TABLE>

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

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

Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended November 30, 1995, which can be obtained
free of charge.

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

GENERAL INFORMATION

The Corporation was established as FT International Trust, a Massachusetts
business trust, on March 9, 1984, and reorganized as a corporation under the
laws of the state of Maryland on February 11, 1991. At a special meeting of
shareholders held on March 15, 1994, the shareholders of the Corporation
approved an amendment to the Articles of Incorporation to change the name of the
Corporation to International Series, Inc. The Corporation's address is Liberty
Center, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The
Articles of Incorporation permit the Corporation to offer separate series of
shares representing interests in separate portfolios of securities. The shares
in any one portfolio may be offered in separate classes. With respect to this
Fund, as of the date of this prospectus, the Board of Directors of the
Corporation (the "Directors") has established three classes of shares known as
Class A Shares, Class B Shares, and Class C Shares. This prospectus relates only
to Class A Shares (the "Shares") of the Corporation's portfolio known as
Federated International Equity Fund.

Shares of the Fund are designed for investors who wish to spread their
investments beyond the United States and who are prepared to accept the
particular risks associated with these investments. It is not intended to
provide a complete investment program for an investor. For more information on
how to purchase Class A Shares please refer to "How to Purchase Shares." A
minimum initial investment of $500 is required, unless the investment is in a
retirement account, in which case the minimum investment is $50. 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." The Fund 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."

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

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

. the opportunity to invest in non-U.S. companies believed to have superior
growth potential;

. the opportunity to invest in foreign countries with economic policies or
business cycles different from those of the United States; and

. the opportunity to reduce portfolio volatility to the extent that securities
markets inside and outside the United States do not move in harmony.

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

EQUITY AND FIXED INCOME SECURITIES

The high-quality debt securities in which the Fund will invest will possess a
minimum credit rating of A as assigned by Standard & Poor's Ratings Group
("S&P") or A by Moody's Investors Service, Inc. ("Moody's"), or, if unrated,
will be judged by Federated Global Research Corp., the Fund's investment adviser
(the "Adviser"), to be of comparable quality. Because the average quality of the
Fund's portfolio investments should remain constantly between A and AAA, the
Fund will seek to avoid the adverse consequences that may arise for some debt
securities in difficult economic circumstances. Downgraded securities will be
evaluated on a case by case basis by the Adviser. The Adviser will

The prices of fixed income securities generally fluctuate inversely to the
direction of interest rates.

DEPOSITARY RECEIPTS

FORWARD COMMITMENTS

MONEY MARKET INSTRUMENTS

REPURCHASE AGREEMENTS

Repurchase agreements are arrangements in which banks, broker/ dealers, and
other recognized financial institutions sell securities to the Fund and agree at
the time of sale to repurchase them at a mutually agreed upon time and price. 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.

OPTIONS AND FINANCIAL
FUTURES CONTRACTS

WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS

FOREIGN CURRENCY TRANSACTIONS

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS

PUT AND CALL OPTIONS WITH RESPECT TO EQUITY SECURITIES

The Fund is authorized to invest in put and call
options that are traded on securities exchanges.
The Fund may also purchase and write over-
the-counter options ("OTC options") on portfolio securities in negotiated
transactions with the buyers or writers of the options since options on some of
the portfolio securities held by the Fund are not traded on an exchange. The
Fund will purchase and write OTC options only with investment dealers and other
financial institutions (such as commercial banks or savings and loan
associations) deemed credit-worthy by the Adviser.

FINANCIAL FUTURES AND OPTIONS
ON FINANCIAL FUTURES

When the Fund writes a call option on a financial futures contract, it is
undertaking the obligation of selling the financial futures contract at a fixed
price at any time during a specified period if the option is exercised.
Conversely, as a purchaser of a put option on a financial futures contract, the
Fund is entitled (but not obligated) to sell a financial futures contract at the
fixed price during the life of the option.
The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of securities
eligible for purchase by the Fund. The Fund will use these transactions to
attempt to protect its ability to purchase securities in the future at price
levels existing at the time it enters into the transactions. When the Fund
writes a put option on a futures contract, it is undertaking to buy a particular
futures contract at a fixed price at any time during a specified period if the
option is exercised. As a purchaser of a call option on a futures contract, the
Fund is entitled (but not obligated) to purchase a futures contract at a fixed
price at any time during the life of the option.

RISK CONSIDERATIONS

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 diversifies its investments broadly among foreign countries,
including both developed and developing countries. At least three different
countries will always be represented. As of November 30, 1995, the portfolio
contained securities from issuers located primarily in Japan, the United
Kingdom, France, Switzerland, Hong Kong, and Australia. There are also
investments in several other countries.

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.

CURRENCY RISKS

FOREIGN COMPANIES

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

. less publicly available information about foreign companies;

. 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 companies;

. 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 foreign securities 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

SHORT SALES

RISKS ASSOCIATED WITH FINANCIAL FUTURES CONTRACTS AND OPTIONS ON FINANCIAL
FUTURES CONTRACTS

contracts or for options on financial futures contracts will exist at all times.
Although the Adviser will consider liquidity before entering into financial
futures contracts or options on financial futures contracts transactions, there
is no assurance that a liquid secondary market on an exchange will exist for any
particular financial futures contract or option on a financial futures contract
at any particular time. The Fund's ability to establish and close out financial
futures contracts and options on financial futures contract positions depends on
this secondary market. If the Fund is unable to close out its position due to
disruptions in the market or lack of liquidity, the losses to the Fund could be
significant.

INVESTMENT LIMITATIONS

The Fund will not:

. acquire more than 10% of the outstanding voting securities of any one issuer,
or acquire any securities of Fiduciary Trust Company International or its
affiliates;

. sell securities short except under strict limitations;

The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.

The Fund will not:

. invest more than 5% of its assets in warrants;

. own securities of open-end or closed-end investment companies, except under
certain circumstances and subject to certain limitations not exceeding 10% of
its total assets (the Fund will indirectly bear its proportionate share of any
fees and expenses paid by other investment companies, in addition to the fees
and expenses payable directly by the Fund.);

. invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations;

. purchase put options on securities unless the securities or an offsetting call
option are held in the Fund's portfolio.

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

NET ASSET VALUE

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

INVESTING IN CLASS A SHARES

SHARE PURCHASES

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.)

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. It is the financial institution's responsibility to transmit orders
promptly. 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.

DIRECTLY FROM THE DISTRIBUTOR

An investor may place an order to purchase Shares directly from the distributor
once an account has been established. To do so:

. complete and sign the new account form available from the Fund;

. enclose a check made payable to Federated International Equity Fund--Class A
Shares; and

. mail both to Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.

BY WIRE

To purchase Shares directly from the distributor by wire, call the Fund. All
information needed will be taken over the telephone, and the order is considered
received when the transfer agent's bank, State Street Bank, receives payment by
wire. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE;
For Credit to: Federated International Equity Fund--Class A Shares; Fund Number;
Trade Date and Order Number; Group Number or Dealer Number; Nominee or
Institution Name; ABA Number 011000028. 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.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge
Sales Charge as Dealer
as a Percentage Concession
a Percentage of Price Net as a Percentage
Amount of of Public Amount of Public
Transaction Offering Invested Offering Price
<S> <C> <C> <C>
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
$1,000,000 2.00% 2.04% 1.80%
$1,000,000
or greater 0.00% 0.00% 0.25%*
</TABLE>

*See sub-section entitled "Dealer Concession" below.

No sales charge is imposed for Class A Shares purchased through bank trust
departments, investment advisers 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 to
shareholders designated as Liberty Life Members. However, investors who purchase
shares through a trust department, investment adviser or retirement plan may be
charged an additional service feeby that institution. Additionally, no sales
charge is imposed for Class A Shares purchased through "wrap accounts" or
similar programs, under which clients pay a fee or fees for services.

DEALER CONCESSION

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;

. signing a 13-month letter of intent;

. using the reinvestment privilege;

. purchases with proceeds from redemptions of unaffiliated investment companies;
or

. concurrent purchases.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

As shown in the table on page 13, larger purchases may eliminate or 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 eliminated or reduced for purchases made at one time by a trustee
or fiduciary for a single trust estate or a single fiduciary account.

To receive the sales charge elimination or 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 eliminate or 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 management 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 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 applied to the
shareholder's account at the end of the 13-month period unless the amount
specified in the letter of intent is not purchased. In this event, 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

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge elimination or reduction, a
shareholder has the privilege of combining concurrent purchases of Class A
Shares 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.

SYSTEMATIC INVESTMENT PROGRAM

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

SUBACCOUNTING SERVICES

Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. Institutions holding Shares
in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other services provided which may be
related to the ownership of Shares. This prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fees charged for those services, and any
restrictions and limitations imposed. State securities laws may require certain
financial institutions such as depository institutions to register as dealers.

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

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 Federated
Funds imposes any additional fees on exchanges. Shareholders in certain other
Federated Funds may exchange their shares in the Federated Funds for Class A
Shares.

ELIMINATED OR REDUCED
THE SALES CHARGE

The Fund has exchange privileges with the following Federated Funds:

American Leaders Fund, Inc., Capital Growth Fund (Class A Shares and Class C
Shares only); Federated Bond Fund; Federated Limited Term Fund (Class A Shares
only); Federated Limited Term Municipal Fund (Class A Shares only); Federated
Small Cap Strategies Fund; Federated Strategic Income Fund; Federated
International Income Fund; Federated World Utility Fund; Federated Fund for U.S.
Government Securities, Inc., Liberty Equity Income Fund, Inc.; Liberty High
Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Utility Fund, Inc.; Michigan Intermediate
Municipal Trust (Class A Shares only); Pennsylvania Municipal Income Fund (Class
A Shares only); and Tax-Free Instruments Trust (Class A Shares only).

Prospectuses for these funds are available by writing to Federated Securities
Corp.

REQUIREMENTS FOR EXCHANGE

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

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 Services Company, P.O. Box 8600, Boston, Massachusetts
02266-8600, and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions may be 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 not receive any dividend that
is payable to shareholders of record on that date. This privilege may be
modified or terminated at any time.

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REDEEMING CLASS A SHARES

Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charges, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemptions can be made through a financial institution or directly
from the Fund. Redemption requests must be received in proper form and may be
made as described as below.

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 wire transferred 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 been 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 redemption instructions may 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 by Mail" should be considered. If at any time the Fund
shall determine it necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.

SIGNATURES

The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
SYSTEMATIC WITHDRAWAL PROGRAM

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, as amended, of
a 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; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. 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 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, as amended, 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.

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ACCOUNT AND SHARE
INFORMATION

CERTIFICATES AND CONFIRMATIONS

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

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Annual confirmations are sent to report dividends paid during the
year.

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

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

INTERNATIONAL SERIES, INC.
INFORMATION

MANAGEMENT OF THE CORPORATION

BOARD OF DIRECTORS

ADVISORY FEES

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 John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Prior to September 1995 the Adviser had not served as an
investment adviser to mutual funds.

DISTRIBUTION OF CLASS A SHARES

SHAREHOLDER SERVICES

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 1% 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.

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 1% of the net asset value
of Class A 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.)
In addition to payments made pursuant to the 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 Fund's Adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Corporation and the Fund. Federated
Administrative Services provides these at an annual rate which relates to the
average aggregate daily net assets of all Federated Funds:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
<C> <S>
.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
</TABLE>

BROKERAGE TRANSACTIONS

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

SHAREHOLDER INFORMATION

VOTING RIGHTS

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

TAX INFORMATION

FEDERAL INCOME TAX

capital gains no matter how long the shareholders have held the Shares. No
federal income tax is due on any dividends earned in an IRA or qualified
retirement plan until distributed.

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

Fund 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 the total return for Class A Shares.

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.

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

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

OTHER CLASSES OF SHARES

Class B Shares are sold primarily to customers of financial institutions,
subject to a maximum contingent deferred sales charge of 5.50% and a Rule 12b-1
fee of up up to .75 of 1%. In addition, Class B Shares are subject to a
shareholder services fee of up to .25% of 1% of the Class B Shares' average
daily net assets. 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 load. Class C Shares are distributed pursuant
to a Rule 12b-1 Plan adopted by the Fund, whereby, the distributor is paid a fee
of up to .75 of 1%. Class C Shares are also subject to a shareholder services
fee of up to .25 of 1% 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.

The stated advisory fee is the same for all classes of shares.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated International Equity Fund
Class A Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------------

FEDERATED INTERNATIONAL
EQUITY FUND
(FORMERLY, INTERNATIONAL
EQUITY FUND)
(A PORTFOLIO OF INTERNATIONAL
SERIES, INC.)
(FORMERLY, FT SERIES, INC.)
CLASS A SHARES

PROSPECTUS

An Open-End, Diversified
Management Investment Company

January 31, 1996

[LOG] FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Cusip 46031P308
1010302A (1/96)

FEDERATED INTERNATIONAL EQUITY FUND
(FORMERLY, INTERNATIONAL EQUITY FUND)
A PORTFOLIO OF INTERNATIONAL SERIES, INC.
(FORMERLY, FT 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 Equity Fund (the "Fund"), a portfolio of
International Series, Inc. (the "Corporation") dated January 31, 1996. This
Statement is not a prospectus. You may request a copy of a prospectus or a
paper copy of this Statement of Additional Information, if you have received
it electronically, free of charge by calling 1-800-235-4669.

Statement dated January 31, 1996
FEDERATED SECURITIES CORP.
Distributor
A Subsidiary of FEDERATED INVESTORS

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

GENERAL INFORMATION ABOUT THE FUND 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
When-Issued and Delayed Delivery
Transactions 2
Repurchase Agreements 2
Lending Portfolio Securities 3
Restricted and Illiquid Securities 3
Futures and Options Transactions 4
Futures Contracts 5
Put Options on Futures Contracts 5
Call Options on Futures Contracts 7
"Margin" in Futures Transactions 8
Regulatory Restrictions 9
Purchasing Put Options on Portfolio
Securities 10
Writing Covered Call Options on
Portfolio Securities 10
Over-the-Counter Options 10
Warrants 10
Additional Risk Considerations 11
Portfolio Turnover 11
INVESTMENT LIMITATIONS 12

INTERNATIONAL SERIES, INC. MANAGEMENT
17

Fund Ownership 26
Directors Compensation 26

INVESTMENT ADVISORY SERVICES 28

Adviser to the Fund 28
Advisory Fees 29
State Expense Limitations 29
BROKERAGE TRANSACTIONS 30

OTHER SERVICES 31

Fund Administration 31
Custodian and Portfolio Recordkeeper
31
Transfer Agent 32
Independent Public Accountants 32
PURCHASING SHARES 32

Distribution Plan (Class B Shares and
Class C Shares Only) and Shareholder
Services 32
Purchases by Sales Representatives,
Directors of the Corporation, and
Employees 33
DETERMINING NET ASSET VALUE 34

Determining Market Value of
Securities 34
Trading in Foreign Securities 34
REDEEMING SHARES 35

Redemption in Kind 36
TAX STATUS 36

The Fund's Tax Status 36

Foreign Taxes 37
Shareholders' Tax Status 37
Capital Gains 37
TOTAL RETURN 37

PERFORMANCE COMPARISONS 38

ABOUT FEDERATED INVESTORS 40

Mutual Fund Market 41
Institutional Clients 41
Trust Organizations 41
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 41
FINANCIAL STATEMENTS 42

APPENDIX 22

GENERAL INFORMATION ABOUT THE FUND

The Fund is a portfolio in International Series, Inc. (the "Corporation"),
which was established as FT International Trust, a Massachusetts business
trust, under a Declaration of Trust dated March 9, 1984, and reorganized as a
corporation under the laws of the state of Maryland on February 11, 1991. At a
special meeting of shareholders held on March 15, 1994, the shareholders of the
Corporation approved an amendment to the Articles of Incorporation to change
the name of the Corporation from FT Series, Inc., to International Series, Inc.
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 Fund's investment objective is to obtain a total return on its assets. The
objective is based on the premise that investing in non-U.S. securities
provides three potential benefits over investing solely in U.S. securities:
o the opportunity to invest in non-U.S. companies believed to have superior
growth potential;
o the opportunity to invest in foreign countries with economic policies or
business cycles different from those of the United States; and
o the opportunity to reduce portfolio volatility to the extent that
securities markets inside and outside the United States do not move in
harmony.
TYPES OF INVESTMENTS
The Fund invests in a diversified portfolio composed primarily of non-U.S.
securities. A substantial portion of these instruments will be equity
securities of established companies in economically developed countries. The
Fund will invest at least 65%, and under normal market conditions,
substantially all of its total assets, in equity securities denominated in

foreign currencies, including European Currency Units, of issuers located in at
least three countries outside of the United States and sponsored or unsponsored
American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), and
European Depositary Receipts ("EDRs"), collectively, "Depositary Receipts." The
Fund may also purchase investment grade fixed income securities and foreign
government securities; enter into forward commitments, repurchase agreements,
and foreign currency transactions; and maintain reserves in foreign or U.S.
money market instruments.
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.
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. 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 deemed by Federated Global
Research Corp., the Fund's investment adviser (the "Adviser") to be
creditworthy.

LENDING PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities 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 Corporation's Board of
Directors (the "Directors") and will receive collateral equal to at least 100%
of the value of the securities loaned. The Fund did not lend portfolio
securities during the last fiscal year and has no present intent to do so in
the current fiscal year.
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.
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 (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 Rule
144A. The Fund believes that the staff of the SEC has left the question of
determining the liquidity of all restricted securities (eligible for resale
under Rule 144A) to the Directors. The Directors consider the following
criteria in determining the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
When the Fund invests in certain restricted securities determined by the
Directors to be liquid, such investments could have the effect of increasing
the level of Fund illiquidity to the extent that the buyers in the secondary
market for such securities (whether in Rule 144A resales or other exempt
transactions) become, for a time, uninterested in purchasing these securities.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may engage in futures and options hedging transactions. In an effort
to reduce fluctuations in the net asset value of Shares, the Fund may attempt
to hedge all or a portion of its portfolio by buying and selling financial
futures contracts, buying put options on portfolio securities and listed put
options on futures contracts, and writing call options on futures contracts.
The Fund may also write covered call options on portfolio securities to attempt
to increase its current income. The Fund will maintain its positions in
securities, option rights, and segregated cash subject to puts and calls until
the options are exercised, closed, or have expired. An option position on
financial futures contracts may be closed out only on the exchange on which the
position was established.

FUTURES CONTRACTS
The Fund may engage in transactions 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 stock 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 contract 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
anticipated 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.
PUT OPTIONS ON FUTURES CONTRACTS
The Fund may engage in transactions in put options on futures contracts. The
Fund may purchase listed put options on futures contracts. 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. The Fund would purchase put options on futures contracts to
protect portfolio securities against decreases in value resulting from market
factors, such as an anticipated increase in interest rates.
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 may be large
enough to offset both the premium paid by the Fund for the original option plus
the 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.
When the Fund sells a put 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 FUTURES CONTRACTS
The Fund may engage in transactions in call options on futures contracts. In
addition to purchasing put options on futures, the Fund may write listed call
options on futures contracts to hedge its portfolio against, for example, an
increase in market interest rates. 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 market interest
rates rise or as stock prices fall, causing the prices of futures to go down,
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 future's 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 help substantially to 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 will then help offset the 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 value 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 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 (including cash or cash equivalents) plus or minus
the unrealized gain or loss on those open positions, adjusted for the
correlation of volatility 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 the 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 futures contracts initial margin does not
involve a borrowing 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 mark to market its open futures positions. The Fund is also
required to deposit and maintain margin when it writes call options on futures
contracts.
REGULATORY RESTRICTIONS
To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid status as a "commodity pool operator," the
Fund will not enter into a futures contract, or purchase an option thereon, if
immediately thereafter the initial margin deposits for futures contracts held
by it, plus premiums paid by it for open options on futures, would exceed 5% of
the total assets of the Fund. The Fund will not engage in transactions in
futures contracts or options thereon for speculation, but only to attempt to
hedge against changes in market conditions affecting the value of assets which
the Fund holds or intends to purchase. When futures contracts or options
thereon are purchased in order to protect against a price increase on
securities or other assets intended to be purchased later, it is anticipated
that at least 75% of such intended purchases will be completed. When other
futures contracts or options thereon are purchased, the underlying value of
such contracts will at all times not exceed the sum of (1) accrued profit on
such contracts held by the broker; (2) cash or high-quality money market
instruments set aside in an identifiable manner; and (3) cash proceeds from
investments due in 30 days or less.

PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put 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.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may write covered call options to generate income. As a 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. The Fund may only sell 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).
OVER-THE-COUNTER OPTIONS
The Fund may purchase and write over-the-counter options ("OTC options") on
portfolio securities in negotiated transactions with the buyers or writers of
the options for those options on portfolio securities held by the Fund and 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 over-the-counter options may not.
WARRANTS
The Fund may invest in warrants. Warrants are basically 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.
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 Adviser, any
losses resulting from the holding of the Funds' 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 will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to
achieve the Fund's investment objective. Portfolio securities will be sold when
the Adviser believes it is appropriate, regardless of how long those securities
have been held. For the fiscal years ended November 30, 1995 and 1994, the
portfolio turnover rates were 166% and 73%, respectively.
For the fiscal year ended November 30, 1995, the variation in the Fund's
portfolio turnover rate was due to country rotations, investment transactions,
and an increase in the number of redemptions incurred by the Fund.

INVESTMENT LIMITATIONS

DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its total assets, the Fund will not
purchase securities of any one issuer (other than securities issued or
guaranteed by the government of the United States or its agencies or
instrumentalities) if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer. To comply with
certain state restrictions, the Fund will not purchase securities of any
issuer if as a result more than 5% of its total assets would be invested
in securities of that issuer. (If state restrictions change, this latter
restriction may be revised without shareholder approval or notification.)
ACQUIRING SECURITIES
The Fund will not acquire more than 10% of the outstanding voting
securities of any one issuer, or acquire any securities of Fiduciary Trust
Company International or its affiliates.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of its total assets in securities
of issuers having their principal business activities in the same
industry.
BORROWING
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts up to one-
third of the value of its total assets, including the amount borrowed. The
Fund will not purchase securities while outstanding borrowings exceed 5%
of the value of its total assets. (This borrowing provision is not for
investment leverage but solely to facilitate management of the portfolio
by enabling the Fund to meet redemption requests when the liquidation of
portfolio securities would be inconvenient or disadvantageous. )

PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate assets, except when
necessary for permissible borrowings. In those cases, it may pledge assets
having a value of 15% of its assets taken at cost. Neither the deposit of
underlying securities or other assets in escrow in connection with the
writing of put or call options or the purchase of securities on a when-
issued basis, nor margin deposits for the purchase and sale of financial
futures contracts and related options are deemed to be a pledge.
BUYING ON MARGIN
The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions, except
that the Fund may make margin payments in connection with its use of
financial futures contracts or related options and transactions.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except in connection with
transactions described in other investment limitations or as required by
forward commitments to purchase securities or currencies.
UNDERWRITING
The Fund will not underwrite or participate in the marketing of securities
of other issuers, except as it may be deemed to be an underwriter under
federal securities law in connection with the disposition of its portfolio
securities.
INVESTING IN REAL ESTATE
The Fund will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate or issued by
companies, including real estate investment trusts, which invest in real
estate or interests therein.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial futures contracts and

options on financial futures contracts, provided that the sum of its
initial margin deposits for financial futures contracts held by the Fund,
plus premiums paid by it for open options on financial futures contracts
may not exceed 5% of the fair market value of the Fund's total assets,
after taking into account the unrealized profits and losses on those
contracts. Further, the Fund may engage in foreign currency transactions
and purchase or sell forward contracts with respect to foreign currencies
and related options.
LENDING CASH OR SECURITIES
The Fund will not lend any assets except portfolio securities. This shall
not prevent the purchase or holding of bonds, debentures, notes,
certificates of indebtedness, or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Fund's investment objective and policies or its Articles of Incorporation.
INVESTING IN MINERALS
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs, other than debentures or equity stock
interests.
SELLING SHORT
The Fund will not sell securities short unless (1) it owns, or has a right
to acquire, an equal amount of such securities, or (2) it has segregated
an amount of its other assets equal to the lesser of the market value of
the securities sold short or the amount required to acquire such
securities. The segregated amount will not exceed 10% of the Fund's net
assets. While in a short position, the Fund will retain the securities,
rights, or segregated assets.

Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by the

Directors without shareholder approval. Except as noted, shareholders will be
notified before any material change in these limitations becomes effective.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its net assets in warrants. No
more than 2% of the Fund's net assets, to be included within the overall
5% limit on investments in warrants, may be invested in warrants which are
not listed on the New York Stock Exchange or the American Stock Exchange.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own securities of open-end investment companies, own
more than 3% of the total outstanding voting stock of any closed-end
investment company, invest more than 5% of its total assets in any closed-
end investment company, or invest more than 10% of its total assets in
closed-end investment companies in general. The Fund will purchase
securities of closed-end 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, reorganization, or acquisition of assets. The Fund will
indirectly bear its proportionate share of any fees and expenses paid by
other investment companies, in addition to the fees and expenses payable
directly by the Fund.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including securities not determined by the Directors

to be liquid, repurchase agreements with maturities longer than seven days
after notice, and certain over-the-counter options.
DEALING IN PUTS AND CALLS
The Fund will not write call options or put options on securities, except
hat the Fund may write covered call options and secured put options on all
or any portion of its portfolio, provided the securities are held in the
Fund's portfolio or the Fund is entitled to them in deliverable form
without further payment or the Fund has segregated cash in the amount of
any further payments. The Fund will not purchase put options on securities
unless the securities or an offsetting call option is held in the Fund's
portfolio. The Fund may also purchase, hold or sell (i) contracts for
future delivery of securities or currencies and (ii) warrants granted by
the issuer of the underlying securities.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS
OF THE CORPORATION
The Fund will not purchase or retain the securities of any issuer if the
officers and Directors of the Corporation or the Fund's investment adviser
or sub-adviser owning individually more than 1/2 of 1% of the issuer's
securities together own more than 5% of the issuer's securities.
ARBITRAGE TRANSACTIONS
To comply with certain state restrictions, the Fund will not enter into
transactions for the purpose of engaging in arbitrage. If state
requirements change, this restriction may be revised without shareholder
notification.
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.
To comply with registration requirements in certain states, the Fund (1) will
limit short sales of securities of any class of any one issuer to the lesser of

2% of the Fund's net assets or 2% of the securities of that class, (2) will
make short sales only on securities listed on recognized stock exchanges. The
latter restrictions, however, do not apply to short sales of securities the
Fund holds or has a right to acquire without the payment of any further
consideration, and (3) will not invest more than 5% of its total assets in
restricted securities. (If state requirements change, these restrictions may be
revised without shareholder notification.)
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its total assets during the last fiscal year and has no present intent to do
so in the coming fiscal year.

INTERNATIONAL SERIES, INC. MANAGEMENT

OFFICERS AND DIRECTORS ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH INTERNATIONAL SERIES, INC., AND PRINCIPAL OCCUPATIONS.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director

Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, 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, Trustee, or Managing General Partner of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty

Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director

Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.

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

Marjorie P. Smuts
4905 Bayard Street

Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.

J. Christopher Donahue
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 Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or Executive Vice President of the

Funds; Director, Trustee, or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Director of the
Corporation.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
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 Services Company; President and Trustee, Federated Shareholder
Services; Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; 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: 3-5 Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insurance Management
Series; Intermediate Municipal Trust; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund,
Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters Funds;
RIMCO Monument Funds; The Shawmut Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust For Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.

FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding Shares.
As of January 9, 1996, the following shareholders of record owned 5% or more of
the outstanding Class A Shares of the Fund: Clooney & Co., New York, New York,
owned approximately 1,109,333 Class A Shares (10.05%); and Bozworth Company,
Little Rock, Arkansas, owned approximately 1,039,050 Class A Shares (6.25%).
As of January 2, 1996, the following shareholder of record owned 5% or more of
the outstanding Class B Shares of the Fund: Merrill Lynch Pierce Fenner & Smith
(as record owner holding Class B Shares for its clients), Jacksonville,
Florida, owned approximately 25,212 Class B Shares (5.76%).
As of January 2, Merrill Lynch Pierce Fenner & Smith (as record owner holding
Class C Shares for its clients), Jacksonville, Florida, owned approximately
160,227 Class C Shares (34.86%) 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.

DIRECTORS COMPENSATION

AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO DIRECTORS FROM
POSITION WITH FROM THE THE CORPORATION
THE CORPORATIONCORPORATION *# AND FUND COMPLEX +

John F. Donahue, $0 $0 for the Corporation and
Chairman and Director 54 other investment companies in the Fund
Complex

Thomas G. Bigley, ++ $739.00 $86,331 for the Corporation and

Director 54 other investment companies in the Fund
Complex

John T. Conroy, Jr., $801.00 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex

William J. Copeland, $801.00 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex

James E. Dowd, $801.00 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Lawrence D. Ellis, M.D., $739.00 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Edward L. Flaherty, Jr. $801.00 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Peter E. Madden, $739.00 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Gregor F. Meyer, $739.00 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

John E. Murray, Jr. $739.00 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Wesley W. Posvar, $739.00 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Marjorie P. Smuts, $739.00 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

* Information is furnished for the fiscal year ended November 30, 1995.
#The aggregate compensation is provided for the Corporation which is comprised
of 2 portfolios.
+ The information is provided for the last calendar year.
++ Mr. Bigley served on 39 investment companies in the Federated Funds Complex
from January 1 through September 30, 1995. In October 1, 1995, he was
appointed a Trustee on 15 additional Federated Funds.

INVESTMENT ADVISORY SERVICES

The Adviser shall not be liable to the Fund, the Corporation, 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 the prospectus. For the period from September 1, 1995 to
November 30, 1995, Federated Global Research Corp. received $535,649. For the
period from December 1, 1994 to August 31, 1995, Federated Management, the
Fund's former investment adviser, received $ 1,772,031. For the period from
March 15, 1994 to November 30, 1994, Federated Management received 1,872,710.
For the period from December 1, 1993 through March 14, 1994, Fiduciary
International, Inc., the Fund's initial investment adviser, received $656,740.
For the fiscal year ended November 30, 1993, Fiduciary International, Inc.
received $1,387,617, which was reduced by $16,560 because of undertakings to
limit the Fund's expenses.
STATE EXPENSE LIMITATIONS
The Adviser and sub-adviser have undertaken to comply with the expense
limitations established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory and sub-advisory
fees, but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2-1/2% per year of the first $30 million of
average net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets, the
Adviser and sub-adviser will reimburse the Fund for their expenses over
the limitation.

If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory and sub-advisory fees paid will be reduced by the
amounts of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amounts to be reimbursed by the Adviser and
sub-adviser will be limited, in any single fiscal year, by the amounts of
the investment advisory and sub-advisory fees.
This arrangement is not part of the advisory contract or sub-advisory
agreement and may be amended or rescinded in the future.
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 fiscal years ended November 30, 1995, 1994, and 1993, the
Fund paid total brokerage commissions of $2,289,648, $1,256,110, and
$1,072,963, respectively.
Although investment decisions for the Fund are made independently from those of
any 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 Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the fiscal years ended November 30, 1995,
1994, and 1993, Federated Administrative Services earned $322,342, $349,224,
and $208,142, respectively. Dr. Henry J. Gailliot, an officer of Federated
Global Research Corp., the Adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.

TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee based
on size, type, and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
PURCHASING SHARES

Except under certain circumstances described in the respective prospectuses,
Shares are sold at their net asset value, plus a sales load (for Class A Shares
only) on days the New York Stock Exchange is open for business. The procedure
for purchasing Shares is explained in the prospectus under "How to Purchase
Shares."
DISTRIBUTION PLAN (CLASS B SHARES AND CLASS C SHARES ONLY) AND SHAREHOLDER
SERVICES
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services 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 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 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 objective. By identifying potential
investors whose needs are served by the Fund's objective, 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 fiscal year ended November 30, 1995, payments in the amount of $27,576
were made pursuant to the Distribution Plan for Class B Shares, all of which
was paid to financial institutions. For the fiscal year ended November 30,
1995, payments in the amount of $57,321 were made pursuant to the Distribution
Plan for Class C Shares, all of which was paid to financial institutions. In
addition, for the fiscal year ended November 30, 1995, payments were made
pursuant to the Shareholder Services Agreement in the amounts of $548,621,
$9,192 and $19,107 for Class A Shares, Class B Shares and Class C Shares,
respectively, of which $403,783, $0 and $3,003 was waived, respectively.
PURCHASES BY SALES REPRESENTATIVES, DIRECTORS OF THE CORPORATION, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, the Adviser, 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 Shares at net asset value without a sales load.
Shares may also be sold without sales loads to trusts or pension or profit-
sharing plans for these persons.
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.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the Fund's portfolio securities are determined as
follows:
o according to the last reported sale price on a recognized securities
exchange, if available. (If a security is traded on more than one
exchange, the price on the primary market for that security, as determined
by the Adviser or sub- adviser, is used.);
o according to the last reported bid price, if no sale on the recognized
exchange is reported or if the security is traded over-the-counter;
o at fair value as determined in good faith by the Directors; or
o for short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost, which approximates value.
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.
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 after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
prospectus under "How to Redeem Shares." Although the Fund 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
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 institutions 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 Fund's portfolio. 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 a class of
Shares' net asset value during any 90-day period. Any redemption beyond this
amount will also be in cash unless the Directors determine that further cash
payments will have a materially adverse effect on remaining shareholders. 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 will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner the Directors determine to be fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
is 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.
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, 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:

o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities held
less than three months;
o invest in securities within certain statutory limits; and
o distribute 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 average annual total returns for Class A Shares for the one-year,
five-year and ten-year periods ended November 30, 1995, were -3.99%, 5.45%, and
10.19%, respectively.

The Fund's average annual total returns for Class B Shares for the fiscal year
ended November 30, 1995, and for the period from September 28, 1994 (start of
performance) to November 30, 1995, were -4.84% and -7.84%, respectively.
The Fund's average annual total returns for Class C Shares for the fiscal year
ended November 30, 1995, and for the period from April 1, 1993 (start of
performance) to November 30, 1995, were -.29 % and 8.43%, respectively.
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 offering price 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 on Class A Shares, 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 offering price of Shares redeemed. Occasionally, total return
which does not reflect the effect of the sales load may be quoted in
advertising.
PERFORMANCE COMPARISONS

The Fund's performance of each class of Shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in the Fund's or a class of Shares' expenses; and
o various 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 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 indices
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:
o LIPPER ANALYTICAL SERVICES, INC., for example, makes comparative
calculations for one-month, three-month, one-year, and five-year periods
which assume the reinvestment of all capital gains distributions and
income dividends.

o EUROPE, AUSTRALIA, AND FAR EAST (EAFE) INDEX is a market capitalization
weighted foreign securities index, which is widely used to measure the
performance of European, Australian, New Zealand and Far Eastern stock
markets. The index covers approximately 1,020 companies drawn from 18
countries in the above regions. The index values its securities daily in
both U.S. dollars and local currency and calculates total returns monthly.
EAFE U.S. dollar total return is a net dividend figure less Luxembourg
withholding tax. The EAFE is monitored by Capital International, S.A.,
Geneva, Switzerland.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, 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 Standard & Poor's index 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 Standard & Poor's figures.
o 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.
Advertisements and sales literature for all three classes 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 load or contingent deferred sales charge, as applicable.
ABOUT FEDERATED INVESTORS

management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 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
John B. Fisher, President, Institutional Sales Division.

* Source: Investment Company Institute
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
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 Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more

wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS

Appendix
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
P-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:
o Leading market positions in well established industries;
o High rates of return on funds employed;
o Conservative capitalization structures with moderate reliance on debt and
ample asset protection;
o Broad margins in earning coverage of fixed financial charges and high
internal cash generation; and
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1-This highest category 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.
MOODY'S 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
edge.'' 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 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.
STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATING DEFINITIONS
AAA-Debt rated AAA has the highest rating assigned by S&P. 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.

Cusip 46031P308
Cusip 46031P605
Cusip 46031P407