FEDERATED INCOME SECURITIES TRUST, 485BPOS, 1999-08-26

FEDERATED INCOME SECURITIES TRUST
485BPOS, 1999-08-26

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1933 Act File No. 33-3164
1940 Act File No. 811-4577

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ...............................

Post-Effective Amendment No. 32 .............................. X
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and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 25 ............................................. X
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FEDERATED INCOME SECURITIES TRUST

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds

5800 Corporate Drive

Pittsburgh, Pennsylvania 15237-7000

(Address of Principal Executive Offices)

(412) 288-1900

(Registrant's Telephone Number)

John W. McGonigle, Esquire

1001 Liberty Avenue

Federated Investors Tower

Pittsburgh, Pennsylvania 15222-3779

(Name and Address of Agent for Service)

(Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
_X on AUGUST 31, 1999__ pursuant to paragraph (b)

60 days after filing pursuant to paragraph (a)(i) on pursuant to paragraph
(a)(i) 75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies To: Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP

2101 L Street, N.W.
Washington, D.C. 20037

PROSPECTUS

Federated Intermediate Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SHARES

A mutual fund seeking to provide current income by investing in a diversified
portfolio of investment grade securities, which are rated in one of the four
highest categories by a nationally recognized statistical rating organization.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

AUGUST 31, 1999

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which

the Fund Invests? 6

What are the Specific Risks of Investing in the Fund? 8

What Do Shares Cost? 9

How is the Fund Sold? 10

How to Purchase Shares 10

How to Redeem Shares 11

Account and Share Information 13

Who Manages the Fund? 14

Financial Information 15

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide current income. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests in a diversified portfolio of investment grade fixed income
securities consisting primarily of corporate debt securities, U.S. government
and privately issued mortgage backed securities, and U.S. treasury and agency
securities. The Adviser seeks to enhance the Fund's performance by allocating
relatively more of its portfolio to the security type that the Adviser expects
to offer the best balance between current income and risk.

Although the value of the Fund's shares will fluctuate, the Adviser will seek to
manage the magnitude of fluctuation by limiting the Fund's dollar weighted
average maturity to between three and ten years and duration to between three
and seven years. Maturity reflects the time until a fixed income security
becomes payable. Duration measures the price sensitivity of a fixed income
security to changes in interest rates.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

* INTEREST RATE RISK. Prices of fixed income securities generally fall when
interest rates rise.

* CREDIT RISKS. There is a possibility that issuers of securities in which the
Fund may invest may default in the payment of interest or principal on the
securities when due, which would cause the Fund to lose money.

* PREPAYMENT RISK. When homeowners prepay their mortgages in response to lower
interest rates, the Fund will be required to reinvest the proceeds at the lower
interest rates available. Also, when interest rates fall, the price of mortgage
backed securities may not rise to as great an extent as that of other fixed
income securities.

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 or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Fund's Institutional Shares as of the calendar
year-end for each of five years.

The `y' axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 25.00%.

The `x' axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended 1998. The light
gray shaded chart features five distinct vertical bars, each shaded in charcoal,
and each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Fund's Institutional Shares for each calendar year is stated
directly at the top of each respective bar, for the calendar years 1994 through
1998. The percentages noted are: (2.12%), 20.26%, 3.34%, 8.64% and 7.83%
respectively.

The bar chart shows the variability of the Fund's Institutional Shares total
returns on a calendar year-end basis.

The Fund's Institutional Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.

The Fund's total return for the six-month period from January 1, 1999 to June
30, 1999 was (1.79%).

Within the period shown in the Chart, the Fund's Institutional Shares highest
quarterly return was 6.69% (quarter ended June 30, 1995). Its lowest quarterly
return was (2.22%) (quarter ended March 31, 1996).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Institutional Shares Average Annual
Total Returns for the calendar periods ended December 31, 1998. The table shows
the Fund's total returns averaged over a period of years relative to the Lehman
Brothers Government/Corporate Total Index (LBGCTI), a broad-based market index
and the Lipper Intermediate-Term Investment Grade Debt Funds Average (LIIGDFA),
an average of funds with similar investment objectives. Total returns for the
index and average shown do not reflect sales charges, expenses or other fees
that the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.

CALENDAR PERIOD FUND LBGCTI LIIGDFA
1 Year 7.83% 6.92% 7.27%
5 Years 7.34% 7.30% 6.37%
Start of Performance 1 7.34% 8.42% 6.37%

1 The Fund's Institutional Shares' start of performance date was December 20,
1993.

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.

What are the Fund's Fees and Expenses?

FEDERATED INTERMEDIATE INCOME FUND

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Institutional Shares.

SHAREHOLDER FEES

ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 Expenses That are Deducted
From Fund Assets ( as a percentage of average net assets)

Management Fee 2 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.23%
Total Annual Fund
Operating Expenses 0.98%

1 Although not contractually obligated to do so, the Adviser and shareholder
services provider waived certain amounts. These are shown below along with the
net expenses the Fund's Institutional Shares actually paid for the fiscal year
ended April 30, 1999.

Total Waiver of Fund's
Institutional Shares

Expenses 0.43%

Total Annual Institutional
Shares Operating Expenses

(after waivers) 0.55%

2 The Adviser voluntarily waived a portion of the management fee. The Adviser
can terminate this voluntary waiver at any time. The management fee paid by the
Fund's Institutional Shares (after the voluntary waiver) was 0.32% for the year
ended April 30, 1999.

3 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid by
the Fund's Institutional Shares (after the voluntary reduction) was 0.00% for
the year ended April 30, 1999. </TABLE>

EXAMPLE

The Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares' operating expenses are
BEFORE WAIVERS as shown in the Table and remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

1 Year $ 100
3 Years $ 312
5 Years $ 542
10 Years $1,201

What are the Fund's Investment Strategies?

The Adviser actively manages the Fund's portfolio seeking current income within
the Fund's investment policy parameters for limiting credit risk and share price
volatility attributable to interest rate risk. The Fund limits credit risk by
investing exclusively in a diversified portfolio of investment grade fixed
income securities, including corporate debt securities, U.S. government and
privately issued mortgage backed securities, and U.S. treasury and agency
securities. Investment grade securities are rated in one of the four highest
categories (BBB or higher) by a nationally recognized statistical rating
organization ("NRSRO"), or if unrated, of comparable quality as determined by
the Adviser. A description of the various types of securities in which the Fund
invests, and their risks, immediately follows this strategy section.

The Fund's share price volatility attributable to interest rate risk is managed
by maintaining, under normal market conditions, a dollar-weighted average
portfolio duration of between three and seven years. Further, the
dollar-weighted average portfolio maturity of the Fund will normally be between
three and ten years.

Within the Fund's three to seven year portfolio duration range, the Adviser may
seek to change the Fund's interest rate volatility exposure, by lengthening or
shortening duration from time-to-time based on its interest rate outlook. If the
Adviser expects interest rates to decline, it will generally lengthen the Fund's
duration. If the Adviser expects interest rates to increase, it will generally
shorten the Fund's duration. The Adviser formulates its interest rate outlook
and otherwise attempts to anticipate changes in economic and market conditions
by analyzing a variety of factors, such as:

* current and expected U.S. growth;

* current and expected interest rates and inflation;

* the Federal Reserve Board's monetary policy; and

* changes in the supply of or demand for U.S. government securities.

In addition to managing the Fund's portfolio duration, the Adviser seeks to
enhance the Fund's current income by selecting securities, within the Fund's
credit quality range, that the Adviser expects will offer the best relative
value. In other words, in selecting securities, the Adviser assesses whether the
Fund will be adequately compensated for assuming the risks (such as credit risk)
of a particular security by comparing the security to other securities without
those risks. The Adviser continually analyzes a variety of economic and market
indicators in order to arrive at the projected yield "spread" of each security
type. (The spread is the difference between the yield of a security versus the
yield of a U.S. Treasury security with a comparable average life.) The
security's projected spread is weighed against the security's credit risk, (in
the case of corporate securities and privately issued asset backed and mortgage
backed securities) and its risk of prepayment, (in the case of asset backed and
mortgage backed securities) in order to complete the analysis.

Corporate debt securities generally offer higher yields than U. S. government
securities to compensate for credit risk. Similarly, asset and mortgage-backed
securities generally offer higher yields versus U.S. treasury securities and
non-mortgage backed agency securities, to compensate for prepayment risk. The
Adviser invests the Fund's portfolio seeking the higher relative returns of
corporate debt securities and asset and mortgage backed securities, when
available, while maintaining appropriate portfolio diversification and
attempting to limit the associated credit or prepayment risks.

The Adviser attempts to manage the Fund's credit risk by selecting corporate
debt securities that make default in the payment of principal and interest less
likely. The Adviser uses corporate earnings analysis to determine which business
sectors and credit ratings are most advantageous for investment by the Fund. In
selecting individual corporate fixed income securities, the Adviser analyzes a
company's business, competitive position, and financial condition to assess
whether the security's credit risk is commensurate with its potential return.

The Adviser attempts to manage the Fund's prepayment risk by selecting asset and
mortgage backed securities with characteristics that make prepayment less
likely. Characteristics that the Adviser may consider in selecting securities
include the average interest rates of the underlying mortgages and the federal
agencies (if any) that securitize the mortgages. The Adviser attempts to assess
the relative returns and risks for mortgage backed securities by analyzing how
the timing, amount and division of cash flows might change in response to
changing economic and market conditions.

There is no assurance that the Adviser's efforts to forecast market interest
rates and assess the impact of market interest rates in particular will be
successful.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term, higher quality debt securities
and similar obligations. It may do this to minimize potential losses and
maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.

What are the Principal Securities in Which the Fund Invests?

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a Government
Sponsored Entity, or GSE). The United States supports some GSEs with its full
faith and credit. Other GSEs receive support through federal subsidies, loans or
other benefits. A few GSEs have no explicit financial support, but are regarded
as having implied support because the federal government sponsors their
activities. Agency securities are generally regarded as having low credit risks,
but not as low as treasury securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the interest rate and prepayment risks of these mortgage backed
securities.

CORPORATE DEBT SECURITIES

Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.

In addition, the credit risk of an issuer's debt security may vary based on its
priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event of
bankruptcy, holders of senior securities may receive amounts otherwise payable
to the holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer any
payment that would reduce its capital below regulatory requirements.

MORTGAGE BACKED SECURITIES

Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable interest rates.
Interests in pools of adjustable rate mortgages are known as ARMs.

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and prepayments from the underlying mortgages. As
a result, the holders assume all the prepayment risks of the underlying
mortgages.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class. The degree of
increased or decreased prepayment risks depends upon the structure of the CMOs.
However, the actual returns on any type of mortgage backed security depend upon
the performance of the underlying pool of mortgages, which no one can predict
and will vary among pools.

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, Standard and Poor's, a rating service, assigns ratings to investment
grade securities (AAA, AA, A, and BBB) based on their assessment of the
likelihood of the issuer's inability to pay interest or principal (default) when
due on each security. Lower credit ratings correspond to higher credit risk. If
a security has not received a rating, the Fund must rely entirely upon the
Adviser's credit assessment that the security is comparable to investment grade.

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

* Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

* Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

CREDIT RISKS

* Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

* Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not received
a rating, the Fund must rely entirely upon the Adviser's credit assessment.

* Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is perceived
to have an increased credit risk. An increase in the spread will cause the price
of the security to decline.

* Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.

PREPAYMENT RISKS

* Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities with higher interest rates. Conversely, prepayments due to
refinancings decrease when mortgage rates increase. This extends the life of
mortgage backed securities with lower interest rates. Other economic factors can
also lead to increases or decreases in prepayments. Increases in prepayments of
high interest rate mortgage backed securities, or decreases in prepayments of
lower interest rate mortgage backed securities, may reduce their yield and
price. These factors, particularly the relationship between interest rates and
mortgage prepayments makes the price of mortgage backed securities more volatile
than many other types of fixed income securities with comparable credit risks.

* Mortgage backed securities generally compensate for greater prepayment risk by
paying a higher yield. The difference between the yield of a mortgage backed
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security is perceived to have an
increased prepayment risk or perceived to have less market demand. An increase
in the spread will cause the price of the security to decline.

* The Fund may have to reinvest the proceeds of mortgage prepayments in other
fixed income securities with lower interest rates, higher prepayment risks, or
other less favorable characteristics.

What Do Shares Cost?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. When the Fund receives your transaction request in proper form (as
described in the prospectus) it is processed at the next calculated net asset
value (NAV). The Fund does not charge a front-end sales charge. NAV is
determined at the end of regular trading (normally 4:00 p.m. Eastern time) each
day the NYSE is open.

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.

The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to accounts for which financial institutions act in a
fiduciary or agency capacity. Shares are also made available to public and
private organizations or individuals, directly or through investment
professionals.

The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

* Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the next calculated NAV if the investment professional forwards the order to the
Fund on the same day and the Fund receives payment within one business day. You
will become the owner of Shares and receive dividends when the Fund receives
your payment.

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

BY AUTOMATED CLEARING HOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

How to Redeem Shares

You should redeem Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional.

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time), you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed; and

* signatures of all shareholders exactly as registered.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days;

* a redemption is payable to someone other than the shareholder(s) of
record.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions. In addition, you will
receive periodic statements reporting all account activity, including dividends
and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a capital gain distribution,
you will pay the full price for the Shares and then receive a portion of the
price back in the form of a taxable distribution, whether or not you reinvest
the distribution in Shares. Therefore, you should consider the tax implications
of purchasing Shares shortly before the Fund declares a capital gain. Contact
your investment professional or the Fund for information concerning when
dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.

Who Manages the Fund?

The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which totaled approximately $111 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.

THE FUND'S PORTFOLIO MANAGERS ARE:

JOSEPH M. BALESTRINO

Joseph M. Balestrino has been the Fund's portfolio manager since
January 1994. He is Vice President of the Trust. Mr. Balestrino joined
Federated in 1986 and has been a Senior Portfolio Manager and Senior Vice
President of the Fund's Adviser since 1998. He was a Portfolio Manager and
a Vice President of the Fund's Adviser from 1995 to 1998. Mr. Balestrino
served as a Portfolio Manager and an Assistant Vice President of the
Adviser from 1993 to 1995. Mr. Balestrino is a Chartered Financial Analyst
and received his Master's Degree in Urban and Regional Planning from the
University of Pittsburgh.

JOHN T. GENTRY

John T. Gentry has been the Fund's portfolio manager since August 1997.
Mr. Gentry joined Federated in 1995 as an Investment Analyst and has
been a Senior Investment Analyst and an Assistant Vice President of the Fund's
Adviser since 1997. Mr. Gentry served as a Senior Treasury Analyst at Sun
Company, Inc. from 1991 to 1995. Mr. Gentry is a Chartered Financial Analyst
and earned his M.B.A., with concentrations in Finance and Accounting, from
Cornell University.

SUSAN M. NASON

Susan M. Nason has been the Fund's portfolio manager since December 1993.
Ms. Nason joined Federated in 1987 and has been a Senior Portfolio Manager
and Senior Vice President of the Fund's Adviser since 1997. Ms. Nason
served as a Portfolio Manager and Vice President of the Adviser from 1993
to 1997. Ms. Nason is a Chartered Financial Analyst and received her
M.S.I.A. concentrating in Finance from Carnegie Mellon University.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. However, this may be difficult with certain issuers. For example,
funds dealing with foreign service providers or investing in foreign securities
will have difficulty determining the Year 2000 readiness of those entities. This
is especially true of entities or issuers in emerging markets.The financial
impact of these issues for the Fund is still being determined. There can be no
assurance that potential Year 2000 problems would not have a material adverse
effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.

This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.17 $ 9.79 $ 9.77 $ 9.55 $ 9.53
INCOME FROM INVESTMENT OPERATIONS:

Net investment income 0.60 0.63 0.63 0.66 0.66
Net realized and unrealized gain (loss)
on investments. (0.10) 0.38 0.03 0.22 0.02
TOTAL FROM INVESTMENT OPERATIONS 0.50 1.01 0.66 0.88 0.68
LESS DISTRIBUTIONS:

Distributions from net investment income (0.60) (0.63) (0.63) (0.66) (0.66)
Distributions from net realized gain on investments 0.00 1 - (0.01) - -
TOTAL DISTRIBUTIONS (0.60) (0.63) (0.64) (0.66) (0.66)
NET ASSET VALUE, END OF PERIOD $10.07 $10.17 $ 9.79 $ 9.77 $ 9.55
TOTAL RETURN 2 5.03% 10.58% 7.00% 9.13% 7.53%

RATIOS TO AVERAGE NET ASSETS:

Expenses 3 0.98% 1.02% 1.12% 1.40% 1.70%
Net investment income 3 5.44% 5.83% 5.91% 5.67% 5.90%
Expenses (after waivers) 0.55% 0.55% 0.55% 0.55% 0.48%
Net investment income (after waivers) 5.87% 6.30% 6.48% 6.52% 7.12%
SUPPLEMENTAL DATA:

Net assets, end of period (000 omitted) $219,824 $176,712 $121,307 $87,493 $32,508
Portfolio turnover 41% 44% 55% 66% 88%
</TABLE>

1 Amount represents less than $0.01 per share.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated April 30, 1999, which can be obtained free of charge.

[Graphic]
Federated

World-Class Investment Manager

PROSPECTUS

Federated Intermediate Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SHARES

AUGUST 31, 1999

A Statement of Additional Information (SAI) dated August 31, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report, Semi-Annual Report and other information without charge, and
make inquiries, call your investment professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

[Graphic]
Federated

Federated Intermediate Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No.811-4577

Cusip 31420C407

3090804A-IS (8/99)

[Graphic]

PROSPECTUS

Federated Intermediate Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SERVICE SHARES

AUGUST 31, 1999

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which

the Fund Invests? 6

What are the Specific Risks of Investing in the Fund? 8

What Do Shares Cost? 10

How is the Fund Sold? 10

How to Purchase Shares 10

How to Redeem Shares 12

Account and Share Information 14

Who Manages the Fund? 14

Financial Information 16

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

* INTEREST RATE RISK. Prices of fixed income securities generally fall when
interest rates rise.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Fund's Institutional Service Shares as of the
calendar year-end for each of five years.

The `y' axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 20.00%.

The `x' axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended 1998. The light
gray shaded chart features five distinct vertical bars, each shaded in charcoal,
and each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Fund's Institutional Service Shares for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1994
through 1998. The percentages noted are: (2.36%), 19.96%, 3.09%, 8.37% and 7.56%
respectively.

The bar chart shows the variability of the Fund's Institutional Service Shares
total returns on a calendar year-end basis.

The Fund's Institutional Service Shares are not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.

The Fund's total return for the six-month period from January 1, 1999 to June
30, 1999 was (1.91%).

Within the period shown in the Chart, the Fund's Institutional Service Shares
highest quarterly return was 6.62% (quarter ended June 30, 1995). Its lowest
quarterly return was (2.28%) (quarter ended March 31, 1996).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Institutional Service Shares Average
Annual Total Returns for the calendar periods ended December 31, 1998. The table
shows the Fund's total returns averaged over a period of years relative to the
Lehman Brothers Government/Corporate Total Index (LBGCTI), a broad-based market
index and the Lipper Intermediate-Term Investment Grade Debt Funds Average
(LIIGDFA), an average of funds with similar investment objectives. Total returns
for the index and average shown do not reflect sales charges, expenses or other
fees that the SEC requires to be reflected in the Fund's performance. Indexes
are unmanaged, and it is not possible to invest directly in an index.

CALENDAR PERIOD FUND LBGCTI LIIGDFA
1 Year 7.56% 6.92% 7.27%
5 Years 7.08% 7.30% 6.37%
Start of Performance 1 7.07% 8.42% 6.37%

1 The Fund's Institutional Service Shares' start of performance date was
December 20, 1993.

What are the Fund's Fees and Expenses?

FEDERATED INTERMEDIATE INCOME FUND

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Institutional Service Shares.

SHAREHOLDER FEES

<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions)
(as a percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES (Before Waivers) 1
Expenses That are Deducted
From Fund Assets (as a
percentage of average net
assets)
Management Fee 2 0.50%
Distribution (12b-1) Fee 3 0.25%
Shareholder Services Fee 4 0.25%
Other Expenses 0.23%
Total Annual Fund
Operating Expenses 1.23%

1 Although not contractually obligated to do so, the Adviser, distributor, and
shareholder services provider waived certain amounts. These are shown below
along with the net expenses the Fund's Institutional Service Shares actually
paid for the fiscal year ended April 30, 1999.

Total Waiver of Fund's
Institutional Service

Shares Expenses 0.43%

Total Annual Institutional
Service Shares Operating

Expenses (after waivers) 0.80%

2 The Adviser voluntarily waived a portion of the management fee. The Adviser
can terminate this voluntary waiver at any time. The management fee paid by the
Fund's Institutional Service Shares (after the voluntary waiver) was 0.32% for
the year ended April 30, 1999.

3 The distribution fee has been voluntarily reduced. This voluntary reduction
can be terminated at any time. The distribution fee paid by the Fund's
Institutional Service Shares (after the voluntary reduction) was 0.16% for the
year ended April 30, 1999.

4 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid by
the Fund's Institutional Service Shares (after the voluntary reduction) was
0.09% for the year ended April 30, 1999. </TABLE>

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares' operating
expenses are BEFORE WAIVERS as shown in the Table and remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:

1 Year $ 125
3 Years $ 390
5 Years $ 676
10 Years $1,489

What are the Fund's Investment Strategies?

* current and expected U.S. growth;

* current and expected interest rates and inflation;

* the Federal Reserve Board's monetary policy; and

* changes in the supply of or demand for U.S. government securities.

Corporate debt securities generally offer higher yields than U. S. government
securities to compensate for credit risk. Similarly, asset and mortgage-backed
securities generally offer higher yields versus U.S. treasury securities and
non-mortgage backed agency securities, to compensate for prepayment risk. The
Adviser invests the Fund's portfolio seeking the higher relative returns of
corporate debt securities and asset and mortgage-backed securities, when
available, while maintaining appropriate portfolio diversification and
attempting to limit the associated credit or prepayment risks.

The Adviser attempts to manage the Fund's prepayment risk by selecting asset and
mortgage-backed securities with characteristics that make prepayment less
likely. Characteristics that the Adviser may consider in selecting securities
include the average interest rates of the underlying mortgages and the federal
agencies (if any) that securitize the mortgages. The Adviser attempts to assess
the relative returns and risks for mortgage backed securities by analyzing how
the timing, amount and division of cash flows might change in response to
changing economic and market conditions.

There is no assurance that the Adviser's efforts to forecast market interest
rates and assess the impact of market interest rates in particular will be
successful.

TEMPORARY DEFENSIVE INVESTMENTS

What are the Principal Securities in Which the Fund Invests?

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

CORPORATE DEBT SECURITIES

MORTGAGE BACKED SECURITIES

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

CREDIT RISKS

* Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

PREPAYMENT RISKS

* The Fund may have to reinvest the proceeds of mortgage prepayments in other
fixed income securities with lower interest rates, higher prepayment risks, or
other less favorable characteristics.

What Do Shares Cost?

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Service Shares. Each share class
has different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.

The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to retail and private banking customers of financial
institutions or individuals, directly or through investment professionals.

When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Institutional Service Shares. Because these
Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees.

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed; and

* signatures of all shareholders exactly as registered.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days; or

* a redemption is payable to someone other than the shareholder(s) of
record.

PAYMENT METHODS FOR REDEMPTIONS

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you
will receive periodic statements reporting all account activity, including
dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.

Who Manages the Fund?

THE FUND'S PORTFOLIO MANAGERS ARE:

JOSEPH M. BALESTRINO

JOHN T. GENTRY

John T. Gentry has been the Fund's portfolio manager since August 1997.
Mr. Gentry joined Federated in 1995 as an Investment Analyst and has been a
Senior Investment Analyst and an Assistant Vice President of the Fund's
Adviser since 1997. Mr. Gentry served as a Senior Treasury Analyst at Sun
Company, Inc. from 1991 to 1995. Mr. Gentry is a Chartered Financial
Analyst and earned his M.B.A., with concentrations in Finance and
Accounting, from Cornell University.

SUSAN M. NASON

ADVISORY FEES

YEAR 2000 READINESS

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. However, this may be difficult with certain issuers. For example,
funds dealing with foreign service providers or investing in foreign securities
will have difficulty determining the Year 2000 readiness of those entities. This
is especially true of entities or issuers in emerging markets. The financial
impact of these issues for the Fund is still being determined. There can be no
assurance that potential Year 2000 problems would not have a material adverse
effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING

OF PERIOD $10.17 $ 9.79 $ 9.76 $ 9.55 $ 9.53
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income 0.58 0.61 0.61 0.63 0.64
Net realized and
unrealized gain (loss) on
investments (0.10) 0.38 0.04 0.21 0.02
TOTAL FROM INVESTMENT

OPERATIONS 0.48 0.99 0.65 0.84 0.66
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.58) (0.61) (0.61) (0.63) (0.64)
Distributions from net
realized gain on
investments 0.00 1 - (0.01) - -
TOTAL DISTRIBUTIONS (0.58) (0.61) (0.62) (0.63) (0.64)
NET ASSET VALUE, END OF

PERIOD $10.07 $10.17 $ 9.79 $ 9.76 $ 9.55
TOTAL RETURN 2 4.77% 10.31% 6.73% 8.86% 7.27%

RATIOS TO AVERAGE NET

ASSETS:

Expenses 3 1.23% 1.27% 1.37% 1.65% 1.94%
Net investment income 3 5.21% 5.56% 5.64% 5.46% 5.63%
Expenses (after waivers) 0.80% 0.80% 0.80% 0.80% 0.72%
Net investment income
(after waivers) 5.64% 6.03% 6.21% 6.31% 6.85%
SUPPLEMENTAL DATA:
Net assets, end of period

(000 omitted) $13,204 $4,522 $790 $508 $276
Portfolio turnover 41% 44% 55% 66% 88%
</TABLE>

1 Amount represents less than $0.01 per share.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated April 30, 1999, which can be obtained free of charge.

[Graphic]
Federated

World-Class Investment Manager

PROSPECTUS

Federated Intermediate Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SERVICE SHARES

AUGUST 31, 1999

[Graphic]
Federated

Federated Intermediate Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-4577

Cusip 31420C506

3090804A-SS (8/99)

[Graphic]

STATEMENT OF ADDITIONAL INFORMATION

Federated Intermediate Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SHARES
NSTITUTIONAL SERVICE SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Federated Intermediate Income Fund
(Fund), dated August 31, 1999. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400.

AUGUST 31, 1999

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Federated

World-Class Investment Manager
Federated Intermediate Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

3090804B (8/99)

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CONTENTS

How is the Fund Organized? 1
Securities in Which the Fund Invests 1
What Do Shares Cost? 9
How is the Fund Sold? 9
Subaccounting Services 9
Redemption in Kind 9
Massachusetts Partnership Law 10
Account and Share Information 10
Tax Information 10
Who Manages and Provides Services to the Fund? 11
How Does the Fund Measure Performance? 14
Who is Federated Investors, Inc.? 15
Financial Information 16
Investment Ratings 16
Addresses 19

How is the Fund Organized?

The Fund is a diversified portfolio of Federated Income Securities Trust
(Trust). The Trust is an open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on January 24,
1986. The Trust may offer separate series of shares representing interests in
separate portfolios of securities. The Fund changed its name from Intermediate
Income Fund to Federated Intermediate Income Fund on February 26, 1996.

The Board of Trustees (the Board) has established two classes of shares of the
Fund, known as Institutional Shares and Institutional Service Shares (Shares).
This SAI relates to both classes of Shares. The Fund's investment adviser is
Federated Investment Management Company (Adviser). Effective March 31, 1999,
Federated Management, former Adviser to the Fund, became Federated Investment
Management Company (formerly, Federated Advisers).

Securities in Which the Fund Invests

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgage backed securities.

CORPORATE DEBT SECURITIES

COMMERCIAL PAPER

Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default. The short
maturity of commercial paper reduces both the market and credit risks as
compared to other debt securities of the same issuer.

DEMAND INSTRUMENTS

Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.

SURPLUS NOTES

Surplus notes are subordinated debt instruments issued by mutual and stock
insurance companies. Mutual insurance companies generally issue surplus notes to
raise capital. Stock insurance companies primarily issue surplus notes in
transactions with affiliates. Surplus notes are treated by insurers as equity
capital, or "surplus" for regulatory reporting purposes. Surplus notes typically
are subordinated to any other debt.

CAPITAL SECURITIES

Capital securities are subordinated securities, generally with a 30-50 year
maturity and a 5-10 year call protection. Dividend payments generally can be
deferred by the issuer for up to 5 years. These securities generally are
unsecured and subordinated to all senior debt securities of the issuer,
therefore, principal and interest payments on capital securities are subject to
a greater risk of default than senior debt securities.

STEP UP PERPETUAL SUBORDINATED SECURITIES

Step up perpetual subordinated securities ("step ups") generally are structured
as perpetual preferred securities (with no stated maturity) with a 10-year call
option. If the issue is not called, however, the coupon increases or "steps up,"
generally 150 to 250 basis points depending on the issue and its country of
jurisdiction. The step up interest rate acts as a punitive rate which would
typically compel the issuer to call the security. Thus, these securities
generally are priced as 10-year securities.

MUNICIPAL SECURITIES

Municipal securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from
federal income tax, the Fund may invest in taxable municipal securities.

MORTGAGE BACKED SECURITIES

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

SEQUENTIAL CMOS

In a sequential pay CMO, one class of CMOs receives all principal payments and
prepayments. The next class of CMOs receives all principal payments after the
first class is paid off. This process repeats for each sequential class of CMO.
As a result, each class of sequential pay CMOs reduces the prepayment risks of
subsequent classes.

PACS, TACS AND COMPANION CLASSES

More sophisticated CMOs include planned amortization classes (PACs) and targeted
amortization classes (TACs). PACs and TACs are issued with companion classes.
PACs and TACs receive principal payments and prepayments at a specified rate.
The companion classes receive principal payments and prepayments in excess of
the specified rate. In addition, PACs will receive the companion classes' share
of principal payments, if necessary, to cover a shortfall in the prepayment
rate. This helps PACs and TACs to control prepayment risks by increasing the
risks to their companion classes.

IOS AND POS

CMOs may allocate interest payments to one class (Interest Only or IOs) and
principal payments to another class (Principal Only or POs). POs increase in
value when prepayment rates increase. In contrast, IOs decrease in value when
prepayments increase, because the underlying mortgages generate less interest
payments. However, IOs tend to increase in value when interest rates rise (and
prepayments decrease), making IOs a useful hedge against interest rate risks.

FLOATERS AND INVERSE FLOATERS

Another variant allocates interest payments between two classes of CMOs. One
class (Floaters) receives a share of interest payments based upon a market index
such as LIBOR. The other class (Inverse Floaters) receives any remaining
interest payments from the underlying mortgages. Floater classes receive more
interest (and Inverse Floater classes receive correspondingly less interest) as
interest rates rise. This shifts prepayment and interest rate risks from the
Floater to the Inverse Floater class, reducing the price volatility of the
Floater class and increasing the price volatility of the Inverse Floater class.

Z CLASSES AND RESIDUAL CLASSES

CMOs must allocate all payments received from the underlying mortgages to some
class. To capture any unallocated payments, CMOs generally have an accrual (Z)
class. Z classes do not receive any payments from the underlying mortgages until
all other CMO classes have been paid off. Once this happens, holders of Z class
CMOs receive all payments and prepayments. Similarly, REMICs have residual
interests that receive any mortgage payments not allocated to another REMIC
class.

The degree of increased or decreased prepayment risks depends upon the structure
of the CMOs. However, the actual returns on any type of mortgage backed security
depend upon the performance of the underlying pool of mortgages, which no one
can predict and will vary among pools.

ASSET BACKED SECURITIES

Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass through certificates. Asset backed securities have prepayment
risks. Like CMOs, asset backed securities may be structured like Floaters,
Inverse Floaters, IOs and POs.

ZERO COUPON SECURITIES

Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the market and credit risks of a zero coupon security. A zero coupon
step-up security converts to a coupon security before final maturity.

There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs, IOs and POs are
the most common forms of stripped zero coupon securities. In addition, some
securities give the issuer the option to deliver additional securities in place
of cash interest payments, thereby increasing the amount payable at maturity.
These are referred to as pay-in- kind or PIK securities.

BANK INSTRUMENTS

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances. Yankee instruments are denominated in
U.S. dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-
U.S. branches of U.S. or foreign banks.

CONVERTIBLE SECURITIES

Convertible securities are convertible preferred stock or convertible bonds that
the Fund has the option to exchange for equity securities of the issuer at a
specified conversion price. The option allows the Fund to realize additional
returns if the market price of the equity securities exceeds the conversion
price. For example, the Fund may hold securities that are convertible into
shares of common stock at a conversion price of $10 per share. If the market
value of the shares of common stock reached $12, the Fund could realize an
additional $2 per share by converting its securities.

Convertible preferred stock and convertible bonds pay or accrue interest or
dividends at a specified rate. The rate may be a fixed percentage of the
principal or adjusted periodically. In addition, the issuer of a convertible
bond must repay the principal amount of the bond, normally within a specified
time. Convertible preferred stock and convertible bonds provide more income than
equity securities.

The Fund treats convertible securities as fixed income securities for purposes
of its investment policies and limitations, because of their unique
characteristics.

FOREIGN SECURITIES

Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:

* it is organized under the laws of, or has a principal office located in,
another country;

* the principal trading market for its securities is in another country; or

* it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.

Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing.

FOREIGN EXCHANGE CONTRACTS

In order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received from the sale of a foreign
security into U.S. dollars, the Fund may enter into spot currency trades. In a
spot trade, the Fund agrees to exchange one currency for another at the current
exchange rate. The Fund may also enter into derivative contracts in which a
foreign currency is an underlying asset. The exchange rate for currency
derivative contracts may be higher or lower than the spot exchange rate. Use of
these derivative contracts may increase or decrease the Fund's exposure to
currency risks.

DERIVATIVE CONTRACTS

Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.

For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.

The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.

Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.

The Fund may trade in the following types of derivative contracts.

FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. Futures contracts traded OTC are
frequently referred to as forward contracts.

The Fund may buy and sell foreign currency forward contracts and foreign
currency futures contracts.

OPTIONS

Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.

The Fund may:

* Buy call options on foreign currency futures contracts and on foreign
currencies in anticipation of an increase in the value of the underlying asset;

* Buy put options on foreign currency futures contracts and on foreign
currencies in anticipation of a decrease in the value of the underlying asset;
and

* Buy or write options to close out existing options positions.

The Fund may also write call options on foreign currencies to generate income
from premiums, and in anticipation of a decrease or only limited increase in the
value of the underlying asset. 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.

SWAPS

Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most
swaps do not involve the delivery of the underlying assets by either party, and
the parties might not own the assets underlying the swap. The payments are
usually made on a net basis so that, on any given day, the Fund would receive
(or pay) only the amount by which its payment under the contract is less than
(or exceeds) the amount of the other party's payment. Swap agreements are
sophisticated instruments that can take many different forms, and are known by a
variety of names including caps, floors, and collars. Common swap agreements
that the Fund may use include:

INTEREST RATE SWAPS

Interest rate swaps are contracts in which one party agrees to make regular
payments equal to a fixed or floating interest rate times a stated principal
amount of fixed income securities, in return for payments equal to a different
fixed or floating rate times the same principal amount, for a specific period.
For example, a $10 million LIBOR swap would require one party to pay the
equivalent of the London Interbank Offer Rate of interest (which fluctuates) on
$10 million principal amount in exchange for the right to receive the equivalent
of a stated fixed rate of interest on $10 million principal amount.

CAPS AND FLOORS

Caps and Floors are contracts in which one party agrees to make payments only if
an interest rate or index goes above (Cap) or below (Floor) a certain level in
return for a fee from the other party.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.

DOLLAR ROLLS

Dollar rolls are transactions where the Fund sells mortgage backed securities
with a commitment to buy similar, but not identical, mortgage backed securities
on a future date at a lower price. Normally, one or both securities involved are
TBA mortgage backed securities. Dollar rolls are subject to interest rate risks
and credit risks.

SECURITIES LENDING

The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.

Securities lending activities are subject to interest rate risks and credit
risks.

ASSET COVERAGE

In order to secure its obligations in connection with derivative contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations without entering into an offsetting derivative contract or
terminating a special transaction. This may cause the Fund to miss favorable
trading opportunities or to realize losses on derivative contracts or special
transactions.

CREDIT ENHANCEMENT

Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.

Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to security's
holders. Either form of credit enhancement reduces credit risks by providing
another source of payment for a fixed income security.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.

The Fund may invest in mortgage backed securities primarily by investing in
another investment company (which is not available for general investment by the
public) that owns those securities and that is advised by an affiliate of the
Adviser. This other investment company is managed independently of the Fund and
may incur additional administrative expenses. Therefore, any such investment by
the Fund may be subject to duplicate expenses. However, the Adviser believes
that the benefits and efficiencies of this approach should outweigh the
potential additional expenses. The Fund may also invest in such securities
directly.

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

INTEREST RATE RISKS

CREDIT RISKS

* Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

CALL AND PREPAYMENT RISKS

* Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a call) at a price below its current market price. An increase
in the likelihood of a call may reduce the security's price.

* If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.

* The Fund may have to reinvest the proceeds of mortgage prepayments in other
fixed income securities with lower interest rates, higher prepayment risks, or
other less favorable characteristics.

LIQUIDITY RISKS

* Trading opportunities are more limited for fixed income securities that
have not received any credit ratings, have received ratings below
investment grade or are not widely held.

* Trading opportunities are more limited for CMOs that have complex terms or
that are not widely held. These features may make it more difficult to sell or
buy a security at a favorable price or time. Consequently, the Fund may have to
accept a lower price to sell a security, sell other securities to raise cash or
give up an investment opportunity, any of which could have a negative effect on
the Fund's performance. Infrequent trading of securities may also lead to an
increase in their price volatility.

* Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep the
position open, and the Fund could incur losses.

* OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

RISKS ASSOCIATED WITH COMPLEX CMOS

* CMOs with complex or highly variable prepayment terms, such as companion
classes, IOs, POs, Inverse Floaters and residuals, generally entail greater
market, prepayment and liquidity risks than other mortgage backed securities.
For example, their prices are more volatile and their trading market may be more
limited.

CURRENCY RISKS

* Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risks tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.

* The Adviser attempts to manage currency risk by limiting the amount the Fund
invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in the
value of the U.S. dollar relative to other currencies.

LEVERAGE RISKS

* Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.

* Investments can have these same results if their returns are based on a
multiple of a specified index, security, or other benchmark.

FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income. The
investment objective may not be changed by the Fund's Directors without
shareholder approval.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities. The deposit or payment by the
Fund of initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a security on
margin.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow money
and engage in reverse repurchase agreements in amounts up to one-third of the
value of its total assets, including the amounts borrowed.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge, or hypothecate
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the borrowing. For
purposes of this limitation, the following are not deemed to be pledges: margin
deposits for the purchase and sale of futures contracts and related options, and
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis.

INVESTING IN REAL ESTATE

The Fund will not buy or sell real estate, including limited partnership
interests, although it may invest in the securities of companies whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except to the extent that the Fund may engage in
transactions involving futures contracts and related options.

UNDERWRITING

The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of restricted securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations.

DIVERSIFICATION OF INVESTMENTS

With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities issued by any one issuer (other than cash,
cash items or securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities and repurchase agreements
collateralized by such securities) if as a result more than 5% of the value of
its total assets would be invested in the securities of that issuer. Also, the
Fund will not acquire more than 10% of the outstanding voting securities of any
one issuer.

CONCENTRATION OF INVESTMENTS

The Fund will not invest 25% or more of the value of its total assets in any one
industry except that the Fund may invest 25% or more of the value of its total
assets in securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities, and repurchase agreements collateralized by such
securities.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the Fund from
purchasing or holding U.S. government obligations, money market instruments,
variable rate demand notes, bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering into repurchase agreements, or
engaging in other transactions where permitted by the Fund's investment
objective, policies, and limitations.

THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD OF
DIRECTORS (BOARD) AND BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT. THE FOLLOWING
LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL.
SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS
BECOMES EFFECTIVE.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities including repurchase agreements providing for settlement in
more than seven days after notice, non-negotiable time deposits and certain
restricted securities not determined to be liquid under criteria established by
the Trustees.

WRITING COVERED CALL OPTIONS

The Fund will not write call options on securities unless the underlying
securities are held in a Fund's portfolio, or unless the Fund is entitled to
them in deliverable form without further payment or after segregating cash in
the amount of any further payment. The Fund will not write call options in
excess of 25% of the value of its net assets.

PURCHASING SECURITIES TO EXERCISE CONTROL

The Fund will not purchase securities of a company for purposes of exercising
control or management.

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. For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."

The Fund has not borrowed money or invested in reverse repurchase agreements
during the last fiscal year and has no present intent to do so in the coming
fiscal year.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

* for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

* for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and

* for all other securities at fair value as determined in good faith by the
Board.

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, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, 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 NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. 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 NYSE. 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 Fund's Board, although the actual
calculation may be done by others.

What Do Shares Cost?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

The NAV 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.

How is the Fund Sold?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.

RULE 12B-1 PLAN (INSTITUTIONAL SERVICE SHARES)

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution- related
or shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

Subaccounting Services

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals 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 that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

Redemption in Kind

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

Massachusetts Partnership Law

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Fund. To protect its
shareholders, the Fund has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Fund.

In the unlikely event a shareholder is held personally liable for the Fund's
obligations, the Fund is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Fund will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Fund. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Fund itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.

Account and Share Information

VOTING RIGHTS

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

Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.

As of August 6, 1999, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Institutional Shares: Central Carolina Bank &
Trust, Paradigm Accounts, Durham, NC owned 7,545,584 shares (23.98%); Stockyards
Bank & Trust, Louisville, KY owned 2,321,190 shares (7.38%); Charles Schwab &
Co. Inc., San Francisco, CA owned 2,236,155 shares (7.11%).

As of August 6, 1999, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Institutional Service Shares: Comerica Bank,
Detroit, MI owned 155,532 shares (9.03%); Hudson United Bank, Darien, CT owned
134,733 shares (7.83%); Merchants National Bank, Aurora, IL owned 130,757 shares
(7.60%); and FNB Nominee Co., Indiana,

PA owned 98,155 shares (5.70%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

Tax Information

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.

FOREIGN INVESTMENTS

If the Fund purchases foreign securities, their investment income 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. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable.

Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax-basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of
fixed-income securities denominated in foreign currencies, it is difficult to
project currency effects on an interim basis. Therefore, to the extent that
currency fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to simple
trusts.

If the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes 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. 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.

Who Manages and Provides Services to the Fund?

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of two
funds and the Federated Fund Complex is comprised of 54 investment companies,
whose investment advisers are affiliated with the Fund's Adviser.

As of August 6, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. A pound sign (#) denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings.

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM TRUST
POSITION WITH TRUST FOR PAST FIVE YEARS FROM TRUST AND FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*+ Chief Executive Officer $0 $0 for the Trust and
Birth Date: July 28, 1924 and Director or Trustee of 54 other investment
Federated Investors Tower the Federated Fund companies in the
1001 Liberty Avenue Complex; Chairman and Fund Complex
Pittsburgh, PA Director, Federated
CHAIRMAN AND TRUSTEE Investors, Inc.; Chairman
and Trustee, Federated Investment
Management Company; Chairman and
Director, Federated Investment
Counseling, and Federated Global
Investment Management Corp.; Chairman,
Passport Research, Ltd.

THOMAS G. BIGLEY Director or Trustee of the Federated Fund $1286.01 $113,860.22 for the
Birth Date: February 3, 1934 Complex; Director, Member of Executive Trust and 54 other
15 Old Timber Trail Committee, Children's Hospital of Pittsburgh; investment companies
Pittsburgh, PA Director, Robroy Industries, Inc. (coated steel in the Fund Complex
TRUSTEE conduits/computer storage equipment);
formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice managment).; Director, Member of
Executive Committee, University of Pittsburgh.

JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1414.81 $125,264.48 for the
Birth Date: June 23, 1937 Complex; President, Investment Properties Trust and 54 other
Wood/Commercial Dept. Corporation; Senior Vice President, investment companies
John R. Wood Associates, Inc. Realtors John R. Wood and Associates, Inc., Realtors; in the Fund Complex
3255 Tamiami Trail North Partner or Trustee in private real estate ventures
Naples, FL in Southwest Florida; formerly: President,
TRUSTEE Naples Property Management, Inc. and

Northgate Village Development Corporation.

NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $329.67 $47,958.02 for the
Birth Date: September 3, 1939 Complex; formerly: Partner, Andersen Trust and 39 other
175 Woodshire Drive Worldwide SC. investment companies
Pittsburgh, PA in the Fund Complex
TRUSTEE

JOHN F. CUNNINGHAM++ Director or Trustee of some of the Federated $0 $0 for the Trust and
Birth Date: March 5, 1943 Fund Complex; Chairman, President and Chief 43 other investment
353 El Brillo Way Executive Officer, Cunningham & Co., Inc. companies in the
Palm Beach, FL (strategic business consulting); Trustee Fund Complex
TRUSTEE Associate, Boston College; Director, EMC
Corporation (computer storage systems);
formerly: Director, Redgate Communications.
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer, Inc.
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $1286.01 $113,860.22 for the
Birth Date: October 11, 1932 Complex; Professor of Medicine, University of Trust and 54 other
3471 Fifth Avenue Pittsburgh; Medical Director, University of investment companies
Suite 1111 Pittsburgh Medical Center - Downtown; in the Fund Complex
Pittsburgh, PA Hematologist, Oncologist, and Internist,
TRUSTEE University of Pittsburgh Medical Center;

Member, National Board of Trustees, Leukemia
Society of America.

PETER E. MADDEN Director or Trustee of the Federated Fund $1286.01 $113,860.22 for the
Birth Date: March 16, 1942 Complex; formerly: Representative, Trust and 54 other
One Royal Palm Way Commonwealth of Massachusetts General investment companies
100 Royal Palm Way Court; President, State Street Bank and Trust in the Fund Complex
Palm Beach, FL Company and State Street Corporation.
TRUSTEE Previous Positions: Director, VISA USA and

VISA International; Chairman and
Director, Massachusetts Bankers
Association; Director, Depository Trust
Corporation; Director, The Boston Stock
Exchange.

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM TRUST
POSITION WITH TRUST FOR PAST FIVE YEARS FROM TRUST AND FUND COMPLEX
<S> <C> <C> <C>
JOHN E. MURRAY, JR., J.D., S.J.D. Director or Trustee of $1286.01 $113,860.22 for the
Birth Date: December 20, 1932 the Federated Fund Trust and 54 other
President, Duquesne University Complex; President, Law investment companies
Pittsburgh, PA Professor, Duquesne in the Fund Complex
TRUSTEE University; Consulting
Partner, Mollica & Murray;
Director, Michael Baker
Corp. (engineering,
construction, operations,
and technical services).
Previous Positions: Dean
and Professor of Law,
University of Pittsburgh
School of Law; Dean and
Professor of Law,
Villanova University
School of Law.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund $1286.01 $113,860.22 for the
Birth Date: June 21, 1935 Complex; Public Relations/Marketing/ Trust and 54 other
4905 Bayard Street Conference Planning. investment companies
Pittsburgh, PA Previous Positions: National Spokesperson, in the Fund Complex
TRUSTEE Aluminum Company of America; television
producer, business owner.

GLEN R. JOHNSON Trustee, Federated Investors, Inc.; staff member, $0 $0 for the Trust and
Birth Date: May 2, 1929 Federated Securities Corp. 8 other investment
Federated Investors Tower companies in the
1001 Liberty Avenue Fund Complex
Pittsburgh, PA

PRESIDENT

J. CHRISTOPHER DONAHUE+ President or Executive Vice President of the $0 $0 for the Trust and
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of 22 other investment
Federated Investors Tower some of the Funds in the Federated Fund companies in the
1001 Liberty Avenue Complex; President and Director, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; President and Trustee, Federated
EXECUTIVE VICE PRESIDENT Investment Management Company; President
and Director, Federated Investment Counseling
and Federated Global Investment Management
Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services
Company; Director, Federated

Services Company.

EDWARD C. GONZALES Trustee or Director of some of the Funds in the $0 $0 for the Trust and
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive 1 other investment
Federated Investors Tower Vice President and Treasurer of some of the company in the
1001 Liberty Avenue Funds in the Federated Fund Complex; Vice Fund Complex
Pittsburgh, PA Chairman, Federated Investors, Inc.; Vice
EXECUTIVE VICE PRESIDENT President, Federated Investment Management
Company and Federated Investment
Counseling, Federated Global Investment
Management Corp. and Passport Research,
Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the Trust and
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice 54 other investment
Federated Investors Tower President, Secretary, and Director, Federated companies in the
1001 Liberty Avenue Investors, Inc.; Trustee, Federated Investment Fund Complex
Pittsburgh, PA Management Company; Director, Federated
EXECUTIVE VICE PRESIDENT AND SECRETARY Investment
Counseling and Federated Global
Investment Management Corp.; Director,
Federated Services Company; Director,
Federated Securities Corp.

RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the Trust and
Birth Date: June 17, 1954 President - Funds Financial Services Division, 54 other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various companies in the
1001 Liberty Avenue management positions within Funds Financial Fund Complex
Pittsburgh, PA Services Division of Federated Investors, Inc.

TREASURER

RICHARD B. FISHER President or Vice President of some of the $0 $0 for the Trust and
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Director 6 other investment
Federated Investors Tower or Trustee of some of the Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Executive Vice Fund Complex
Pittsburgh, PA President, Federated Investors, Inc.; Chairman

VICE PRESIDENT and Director, Federated Securities Corp.

WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the Trust and
Birth Date: March 3, 1949 various other Funds in the Federated Fund 41 other investment
Federated Investors Tower Complex; Executive Vice President, Federated companies in the
1001 Liberty Avenue Investment Counseling, Federated Global Fund Complex
Pittsburgh, PA Investment Management Corp., Federated
CHIEF INVESTMENT OFFICER Investment Management Company and
Passport Research, Ltd.; Registered
Representative, Federated Securities
Corp.; Portfolio Manager, Federated
Administrative Services; Vice
President, Federated Investors, Inc.;
formerly: Executive Vice President and
Senior Vice President, Federated
Investment Counseling Institutional
Portfolio Management Services Division;
Senior Vice President, Federated
Investment Management Company and
Passport Research, Ltd.

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM TRUST
POSITION WITH TRUST FOR PAST FIVE YEARS FROM TRUST AND FUND COMPLEX
<S> <C> <C> <C>
JOSEPH M. BALESTRINO Joseph M. Balestrino has $0 $0 for the Trust and
Birth Date: November 3, 1954 been the Fund's portfolio 3 other investment
Federated Investors Tower manager since companies in the
1001 Liberty Avenue January 1994. He is Vice Fund Complex
Pittsburgh, PA President of the Trust.
VICE PRESIDENT Mr. Balestrino joined

Federated in 1986 and has
been a Senior Portfolio
Manager and Senior Vice
President of the Fund's
Adviser since 1998. He was
a Portfolio Manager and a
Vice President of the
Fund's Adviser from 1995 to
1998. Mr. Balestrino
served as a Portfolio
Manager and an Assistant
Vice President of the
Adviser from 1993 to 1995.
Mr. Balestrino is a
Chartered Financial
Analyst and received his
Master's Degree in Urban
and Regional Planning from
the University of
Pittsburgh.

RANDALL S. BAUER Randall S. Bauer has been the Fund's portfolio $0 $0 for the Trust and
Birth Date: November 16, 1957 manager since October 1995. He is Vice one other investment
Federated Investors Tower President of the Trust. Mr. Bauer joined company in the
1001 Liberty Avenue Federated in 1989 and has been a Portfolio Fund Complex
Pittsburgh, PA Manager and a Vice President of the Fund's
VICE PRESIDENT Adviser since 1994. Mr. Bauer is a Chartered
Financial Analyst and received his M.B.A. in
Finance from Pennsylvania State University.

</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust.

++ Mr. Cunningham became a member of the Board of Trustees on January 1, 1999.
He did not earn any fees for serving the Fund Complex since these fees are
reported as of the end of the last calendar year. He did not receive any fees as
of the fiscal year end of the Trust.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to the Trust or any Fund shareholder 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 Trust.

OTHER RELATED SERVICES

Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

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. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.

RESEARCH SERVICES

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

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

MAXIMUM AVERAGE AGGREGATE DAILY ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED
FUNDS 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by

shareholders.

INDEPENDENT AUDITORS

The independent auditor of the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED APRIL 30, 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $1,017,158 $736,045 $539,952
Advisory Fee Reduction 361,410 319,611 344,689
Brokerage Commissions 0 0 0
Administrative Fee 154,999 155,001 155,001

12B-1 FEE

Institutional Service Shares 14,140 - -
SHAREHOLDER SERVICES FEE

Institutional Shares 0 - -
Institutional Service Shares 7,954 - -
</TABLE>

Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.

How Does the Fund Measure Performance?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year, five-year and Start of Performance periods
ended April 30, 1999.

Yield given for the 30-Day period ended April 30, 1999.

START OF

30-DAY PERFORMANCE ON

SHARE CLASS PERIOD 1 YEAR 5 YEARS DECEMBER 20, 1993
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES:

Total Return NA 5.03% 7.84% 6.79%
Yield 5.79% NA NA NA

START OF

30-DAY PERFORMANCE ON
PERIOD 1 YEAR 5 YEARS DECEMBER 20, 1993

INSTITUTIONAL
SERVICE SHARES:

Total Return NA 4.77% 7.57% 6.53%
Yield 5.54% NA NA NA

</TABLE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares 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 NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD

The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-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 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 investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

* references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

* charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;

* discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Funds; and

* information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:

LIPPER ANALYTICAL SERVICES, INC.

Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the "short-term investment grade debt
funds" category in advertising and sales literature.

MERRILL LYNCH TOTAL RETURN INVESTMENT GRADE CORPORATE INDEX (SHORT-
TERM 1-2.99 YEARS)

Merrill Lynch Total Return Investment Grade Corporate Index (Short-Term 1- 2.99
Years) is comprised of over 400 issues of investment grade corporate debt
securities with remaining maturities from 1 to 2.99 years.

MORNINGSTAR, INC.,

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.

LEHMAN BROTHERS GOVERNMENT/CORPORATE TOTAL INDEX

Lehman Brothers Government/Corporate Total Index is comprised of approximately
5,000 issues which include nonconvertible 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 Shearson
Lehman Brothers, Inc. the index calculates total returns for one month, three
month, twelve month, and ten year periods and year-to-date.

Who is Federated Investors, Inc.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state- of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

EQUITY FUNDS

In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value- oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

CORPORATE BOND FUNDS

In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making-based on
intensive, diligent credit analysis-is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.

GOVERNMENT FUNDS

In the government sector, as of December 31, 1998, Federated manages 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.

MONEY MARKET FUNDS

In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield-
J. Thomas Madden; U.S. fixed income-William D. Dawson, III; and global
equities and fixed income-Henry A. Frantzen. The Chief Investment Officers
are Executive Vice Presidents of the Federated advisory companies.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

BANK MARKETING

Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated Funds are available to consumers through major brokerage firms
nationwide-we have over 2,200 broker/dealer and bank broker/dealer relationships
across the country-supported by more wholesalers than any other mutual fund
distributor. Federated's service to financial professionals and institutions has
earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Sales Division, Federated Securities Corp.

Financial Information

The Financial Statements for the Fund for the fiscal year ended April 30, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
Federated Intermediate Income Fund dated April 30, 1999.

Investment Ratings

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

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

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

A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

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

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

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

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

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

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

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
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA-Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.

A-Bonds which are rated A 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.

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

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

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

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

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

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

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

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

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

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

BBB-Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

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

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

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

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

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

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

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

* Leading market positions in well-established industries;

* High rates of return on funds employed;

* Conservative capitalization structure with moderate reliance on debt and
ample asset protection;

* Broad margins in earning coverage of fixed financial charges and high
internal cash generation; and

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

PRIME-2-Issuers rated Prime-1 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

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

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

FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS

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

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

Addresses

FEDERATED INTERMEDIATE INCOME FUND

Institutional Shares
Institutional Service Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR

Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT AUDITORS

Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072

PROSPECTUS

Federated Short-Term Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SHARES

A mutual fund seeking to provide current income by investing primarily in a
diversified portfolio of short and medium-term high grade debt securities.

AUGUST 31, 1999

CONTENTS

Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities
in Which the Fund Invests? 5

What are the Specific Risks of Investing in the Fund? 7
What Do Shares Cost? 9

How is the Fund Sold? 9
How to Purchase Shares 9
How to Redeem Shares 10

Account and Share Information 12
Who Manages the Fund? 12
Financial Information 13

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to seek to provide current income. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

Although the value of the Fund's shares will fluctuate, the Adviser will seek to
manage the magnitude of fluctuation by limiting the Fund's dollar weighted
average maturity and duration to approximately 1.5 years (and, in any event, to
not more than three years). Maturity reflects the time until a fixed income
security becomes payable. Duration measures the price sensitivity of a fixed
income security to changes in interest rates.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

* INTEREST RATE RISK. Prices of fixed income securities generally fall when
interest rates rise.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Fund's Institutional Shares as of the calendar
year-end for each of ten years.

The `y' axis reflects the "% Total Return" beginning with "-3.00%" and
increasing in increments of 3.00% up to 15.00%.

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
ten distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund's
Institutional Shares for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1989 through 1998. The percentages
noted are: 9.40%, 1.98%, 13.86%, 6.13%, 5.48%, (0.53%), 10.89%, 5.41%, 6.41% and
5.73%.respectively.

The bar chart shows the variability of the Fund's Institutional Shares total
returns on a calendar year-end basis.

The Fund's Institutional Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.

The Fund's total return for the six-month period from January 1, 1999 to June
30, 1999 was 1.66%.

Within the period shown in the Chart, the Fund's Institutional Shares highest
quarterly return was 6.04% (quarter ended March 31, 1991). Its lowest quarterly
return was (1.27%) (quarter ended December 31, 1990).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Institutional Shares Average Annual
Total Returns for the calendar periods ended December 31, 1998. The table shows
the Fund's total returns averaged over a period of years relative to Merrill
Lynch Total Return Investment Grade Corporate Index (MLTRIGCI), a broad-based
market index and the Lipper Short Investment Grade Debt Funds Average (LSIGDFA),
an average of funds with similar investment objectives. Total returns for the
index and average shown do not reflect sales charges, expenses or other fees
that the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.

CALENDAR PERIOD FUND MLTRIGCI LSIGDFA
1 Year 5.73% 7.20% 5.77%
5 Years 5.52% 6.54% 5.39%
10 Years 6.40% 8.10% 7.03%

Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

What are the Fund's Fees and Expenses?

FEDERATED SHORT-TERM INCOME FUND

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Institutional Shares.

SHAREHOLDER FEES

ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 Expenses That are Deducted
From Fund Assets ( as a percentage of average net assets)

Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.19%
Total Annual Fund
Operating Expenses 0.84%
1 Although not contractually obligated to do so, the Adviser and
shareholder services provider waived certain amounts. These are shown below
along with the net expenses the Fund's Institutional Shares actually paid for
the fiscal year ended April 30, 1999.

Total Waiver of Fund's
Institutional Shares

Expenses 0.28%
Total Annual Institutional
Shares Operating Expenses
(after waivers) 0.56%
2 The Adviser voluntarily waived a portion of the management fee. The Adviser
can terminate this voluntary waiver at any time. The management fee paid by the
Fund's Institutional Shares (after the voluntary waiver) was 0.37% for the year
ended April 30, 1999. 3 The shareholder services fee has been voluntarily
reduced. This voluntary reduction can be terminated at any time. The shareholder
services fee paid by the Fund's Institutional Shares (after the voluntary
reduction) was 0.00% for the year ended April 30, 1999.

</TABLE>

EXAMPLE

The following Example is intended to help you compare the cost of investing in
the Fund's Institutional Shares with the cost of investing in other mutual
funds.

1 Year $ 86
3 Years $ 268
5 Years $ 466
10 Years $ 1,037

What are the Fund's Investment Strategies?

The Fund invests in a diversified portfolio of investment grade fixed income
securities consisting primarily of U.S. government and privately issued mortgage
backed and asset backed securities; corporate debt securities; and U.S. treasury
and agency securities. Investment grade securities are those rated BBB or higher
by a nationally recognized statistical rating organization (NRSRO). In addition,
at least 65% of the Fund's securities must be rated A or higher (or, for
short-term instruments, in one of the two highest rating categories) by a NRSRO.
A description of the various types of securities in which the Fund invests, and
their risks, immediately follows this strategy section.

The Adviser seeks to enhance the Fund's performance by allocating relatively
more of its portfolio to the security type that the Adviser expects to offer the
best balance between current income and risk and thus offers the greatest
potential for return. The allocation process is based on the Adviser's
continuing analysis of a variety of economic and market indicators in order to
arrive at the projected yield "spread" of each security type. (The spread is the
difference between the yield of a security versus the yield of a U.S. treasury
security with a comparable average life.) The security's projected spread is
weighed against the spread the security can currently be purchased for, as well
as the security's risk of prepayment (in the case of asset backed and mortgage
backed securities) and its credit risk (in the case of corporate securities and
privately issued asset backed and mortgage backed securities) in order to
complete the analysis.

Asset and mortgage backed securities tend to amortize principal on a somewhat
irregular schedule over time, since the borrower can usually prepay all or part
of the loan without penalty. These securities generally offer higher yields
versus U.S. treasury securities and non-mortgage backed agency securities to
compensate for this prepayment risk as well as any credit risk which might be
present in the security. Similarly, corporate debt securities, which tend to pay
off on a predetermined schedule, generally offer higher yields than treasury and
agency securities to compensate for credit risk. The Adviser actively manages
the Fund's portfolio, seeking the higher relative returns of asset and mortgage
backed securities and corporate debt securities, while attempting to limit the
associated prepayment or credit risk.

The Adviser attempts to manage the Fund's prepayment risk by selecting asset and
mortgage backed securities with characteristics that make prepayment
fluctuations less likely. Characteristics that the Adviser may consider in
selecting securities include the average interest rates of the underlying
mortgages and the federal agencies (if any) that support the mortgages. The
Adviser attempts to assess the relative returns and risks for mortgage backed
securities by analyzing how the timing, amount and division of cash flows might
change in response to changing economic and market conditions.

The Adviser attempts to manage the Fund's credit risk by selecting corporate
debt securities that make default in the payment of principal and interest less
likely. The Adviser analyzes a variety of factors, including macroeconomic
analysis and corporate earnings analysis to determine which business sectors and
credit ratings are most advantageous for investment by the Fund. In selecting
individual corporate fixed income securities, the Adviser analyzes the issuer's
business, competitive position, and general financial condition to assess
whether the security's credit risk is commensurate with its potential return.

In addition to managing the Fund's portfolio to seek enhanced current income
while minimizing prepayment and credit risk, the Adviser also seeks to limit the
magnitude of fluctuation of the value of the Fund's shares. The Adviser attempts
to manage price fluctuation by limiting the Fund's dollar weighted average
maturity and duration to approximately 1.5 years and, in any event, to no
greater than three years.

The Adviser may lengthen or shorten duration from time-to-time based on its
interest rate outlook. If the Adviser expects interest rates to decline, it will
generally lengthen the Fund's duration, and if the Adviser expects interest
rates to increase, it will generally shorten the Fund's duration. The Adviser
formulates its interest rate outlook and otherwise attempts to anticipate
changes in economic and market conditions in analyzing a variety of factors,
such as:

* current and expected U.S. growth;

* current and expected interest rates and inflation;

* the U.S. Federal Reserve Board's monetary policy; and

* changes in the supply of or demand for U.S. government securities.

There is no assurance that the Adviser's efforts to forecast market interest
rates and assess the impact of market interest rates on particular securities
will be successful.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term, higher-quality debt securities
and similar obligations. It may do this to minimize potential losses and
maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.

What are the Principal Securities in Which the Fund Invests?

FIXED INCOME SECURITIES

The following describes the principal types of fixed income securities in which
the Fund invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the interest and prepayment risks of these mortgage backed securities.

CORPORATE DEBT SECURITIES

MORTGAGE BACKED SECURITIES

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. As issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and prepayments from the underlying mortgages. As
a result, the holders assume all the prepayment risks of the underlying
mortgages.

Collateralized Mortgage Obligations (CMOs)

CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class. The degree of
increased or decreased prepayment risk depends upon the structure of the CMOs.
However, the actual returns of any type of mortgage backed security depend upon
the performance of the underlying pool of mortgages, which no one can predict
and will vary among pools.

Sequential CMOs

ASSET BACKED SECURITIES

Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass through certificates. Asset backed securities have prepayment
risks. As with CMOs, the cash flows of asset backed securities may be highly
structured.

BANK INSTRUMENTS

CREDIT ENHANCEMENT

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

* Prices of fixed income securities rise and fall in response to changes in the
interest rate paid on newly issued similar securities. Generally, when interest
rates rise, prices of fixed income securities fall. However, market factors,
such as the demand for particular fixed income securities, may cause the price
of certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.

CREDIT RISKS

* Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

* Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the premium received for accepting this risk. Spreads may increase
generally in response to adverse economic or market conditions. A security's
spread may also increase if the security's rating is lowered, or the security is
perceived to have an increased credit risk. An increase in the spread will cause
the price of the security to decline.

PREPAYMENT RISKS

* Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities with higher interest rates. Conversely, prepayments due to
refinancings decrease when mortgage rates increase. This extends the life of
mortgage backed securities with lower interest rates. Other economic factors can
also lead to increases or decreases in prepayments. Increases in prepayments of
high interest rate mortgage backed securities, or decreases in prepayments of
lower interest rate mortgage backed securities, may increase their yield and/or
reduce their price. These factors, particularly the relationship between
interest rates and mortgage prepayments makes the price of mortgage backed
securities more volatile than many other types of fixed income securities with
comparable credit risks.

* Mortgage backed securities generally compensate for greater prepayment risk by
paying a higher yield. The difference between the yield of a mortgage backed
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the premium received for accepting such risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security is perceived to have an
increased prepayment risk or perceived to have less market demand. An increase
in the spread will cause the price of the security to decline.

* The Fund may have to reinvest the proceeds of mortgage prepayments in other
fixed income securities with lower interest rates, higher prepayment risks, or
other less favorable characteristics.

What Do Shares Cost?

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

How is the Fund Sold?

The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to accounts for which financial institutions act in a
fiduciary capacity. Shares are also made available to public and private
organizations or individuals, directly or through investment professionals.

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time), you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed; and

* signatures of all shareholders exactly as registered.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days; or

* a redemption is payable to someone other than the shareholder(s) of
record.

PAYMENT METHODS FOR REDEMPTIONS

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you
will receive periodic statements reporting all account activity, including
dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.

Who Manages the Fund?

THE FUND'S PORTFOLIO MANAGERS ARE:

RANDALL S. BAUER

Randall S. Bauer has been the Fund's portfolio manager since October 1995.
He is Vice President of the Trust. Mr. Bauer joined Federated in 1989 and
has been a Portfolio Manager and a Vice President of the Fund's Adviser
since 1994. Mr. Bauer is a Chartered Financial Analyst and received his
M.B.A. in Finance from Pennsylvania State University.

ROBERT E. CAULEY

Robert E. Cauley has been the Fund's portfolio manager since March 1999.
Mr. Cauley joined Federated in 1996 as a Senior Investment Analyst and an
Assistant Vice President of the Fund's Adviser and has been a Portfolio
Manager since 1997. Mr. Cauley has been a Vice President of the Adviser
since 1999. Mr. Cauley was a member of the Asset-Backed Structuring Group
at Lehman Brothers Holding, Inc. from 1994 to 1996. Mr. Cauley earned his
M.S.I.A., concentrating in Finance and Economics, from Carnegie Mellon
University.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. However, this may be difficult with certain issuers. For example,
funds dealing with foreign service providers or investing in foreign securities
will have difficulty determining the Year 2000 readiness of those entities. This
is especially true of entities or issuers in emerging markets. The financial
impact of these issues for the Fund is still being determined. There can be no
assurance that potential Year 2000 problems would not have a material adverse
effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING

OF PERIOD $ 8.74 $ 8.68 $ 8.68 $ 8.61 $ 8.85
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income 0.52 0.52 0.54 0.57 0.54
Net realized and
unrealized gain (loss)
on investments (0.07) 0.06 0.01 0.07 (0.24)
TOTAL FROM INVESTMENT

OPERATIONS 0.45 0.58 0.55 0.64 0.30
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.52) (0.52) (0.54) (0.57) (0.54)
Distributions in excess of
net investment income 1 - - (0.01) - -
TOTAL DISTRIBUTIONS (0.52) (0.52) (0.55) (0.57) (0.54)
NET ASSET VALUE, END OF

PERIOD $ 8.67 $ 8.74 $ 8.68 $ 8.68 $ 8.61
TOTAL RETURN 2 5.25% 6.88% 6.53% 7.51% 3.55%

RATIOS TO AVERAGE NET

ASSETS:

Expenses 3 0.84% 0.84% 0.84% 0.85% 0.59%
Net investment income 3 5.60% 5.68% 5.93% 6.14% 6.19%
Expenses (after waivers) 0.56% 0.56% 0.56% 0.56% 0.56%
Net investment income
(after waivers) 5.88% 5.96% 6.21% 6.43% 6.22%
SUPPLEMENTAL DATA:
Net assets, end of period

(000 omitted) $188,773 $197,610 $214,438 $216,675 $219,649
Portfolio turnover 54% 49% 55% 77% 38%

</TABLE>

1 Distributions in excess of net investment income for the year ended April 30,
1997 was the result of certain book and tax timing differences. This
distribution did not represent a return of capital for federal income tax
purposes for the year ended April 30, 1997.

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated April 30, 1999, which can be obtained free of charge.

[Graphic]

Federated

World-Class Investment Manager

PROSPECTUS

Federated Short-Term Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SHARES

AUGUST 31, 1999

[Graphic]
Federated

Federated Short-Term Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-4577

Cusip 31420C209

1111903A-IS (8/99)

[Graphic]

PROSPECTUS

Federated Short-Term Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SERVICE SHARES

A mutual fund seeking to provide current income by investing primarily in a
diversified portfolio of short and medium-term high grade debt securities.

AUGUST 31, 1999

CONTENTS

Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities
in Which the Fund Invests? 5

What are the Specific Risks of Investing in the Fund? 7
What Do Shares Cost? 9

How is the Fund Sold? 9
How to Purchase Shares 9
How to Redeem Shares 10

Account and Share Information 12
Who Manages the Fund? 12
Financial Information 13

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

* INTEREST RATE RISK. Prices of fixed income securities generally fall when
interest rates rise.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Fund's Institutional Service Shares as of the
calendar year-end for each of six years.

The `y' axis reflects the "% Total Return" beginning with "-3.00%" and
increasing in increments of 3.00% up to 12.00%.

The `x' axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended 1998. The light
gray shaded chart features six distinct vertical bars, each shaded in charcoal,
and each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Fund's Institutional Service Shares for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1993
through 1998. The percentages noted are: 5.22%, -0.78%, 10.61%, 5.15%, 6.14% and
5.47% respectively.

The bar chart shows the variability of the Fund's Institutional Service Shares
total returns on a calendar year-end basis.

The Fund's Institutional Service Shares are not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.

The Fund's total return for the six-month period from January 1, 1999 to June
30, 1999 was 1.54%.

Within the period shown in the Chart, the Fund's Institutional Service Shares
highest quarterly return was 3.77% (quarter ended June 30, 1995). Its lowest
quarterly return was (0.70%) (quarter ended June 30, 1994).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Institutional Service Shares Average
Annual Total Returns for the calendar periods ended December 31, 1998. The table
shows the Fund's total returns averaged over a period of years relative to the
Merrill Lynch Total Return Investment Grade Corporate Index (MLTRIGCI), a
broad-based market index and the Lipper Short Investment Grade Debt Funds
Average (LSIGDFA), an average of funds with similar investment objectives. Total
returns for the index and average shown do not reflect sales charges, expenses
or other fees that the SEC requires to be reflected in the Fund's performance.
Indexes are unmanaged, and it is not possible to invest directly in an index.

CALENDAR PERIOD FUND MLTRIGCI LSIGDFA
1 Year 5.47% 7.20% 5.77%
5 Years 5.26% 6.54% 5.39%
Start of Performance 1 5.40% 8.10% 7.03%

1 The Fund's Institutional Service Shares start of performance date was January
24, 1992.

What are the Fund's Fees and Expenses?

FEDERATED SHORT-TERM INCOME FUND

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Institutional Service Shares.

SHAREHOLDER FEES

ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 Expenses That are Deducted
From Fund Assets (as a percentage of average net assets)

Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.25%
Shareholder Services Fee 4 0.25%
Other Expenses 0.19%
Total Annual Fund
Operating Expenses 1.09%
1 Although not contractually obligated to do so, the Adviser, Distributor, and
shareholder services provider waived certain amounts. These are shown below along
with the net expenses the Fund's Institutional Service Shares actually paid
for the fiscal year ended April 30, 1999.
Total Waiver of Fund's
Institutional Service

Shares Expenses 0.28%
Total Annual Institutional

Service Shares Operating

Expenses (after waivers) 0.81%
2 The Adviser voluntarily waived a portion of the management fee. The Adviser can
terminate this voluntary waiver at any time. The management fee paid by the
Fund's Institutional Service Shares (after the voluntary waiver) was 0.37% for
the year ended April 30, 1999.
3 The distribution fee has
been voluntarily reduced.
This voluntary reduction
can be terminated at any
time. The distribution fee
paid by the Fund's
Institutional Service
Shares (after the
voluntary reduction) was
0.01% for the year ended
April 30, 1999.
4 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid by the
Fund's Institutional Service Shares (after the voluntary reduction) was 0.24% for
the year ended April 30, 1999.

</TABLE>

EXAMPLE

The following Example is intended to help you compare the cost of investing in
the Fund's Institutional Service Shares with the cost of investing in other
mutual funds.

1 Year $ 111
3 Years $ 347
5 Years $ 601
10 Years $ 1,329

What are the Fund's Investment Strategies?

* current and expected U.S. growth;

* current and expected interest rates and inflation;

* the U.S. Federal Reserve Board's monetary policy; and

* changes in the supply of or demand for U.S. government securities.

There is no assurance that the Adviser's efforts to forecast market interest
rates and assess the impact of market interest rates on particular securities
will be successful.

TEMPORARY DEFENSIVE INVESTMENTS

What are the Principal Securities in Which the Fund Invests?

FIXED INCOME SECURITIES

The following describes the principal types of fixed income securities in which
the Fund invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

CORPORATE DEBT SECURITIES

MORTGAGE BACKED SECURITIES

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. As issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.

Collateralized Mortgage Obligations (CMOs)

CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class. The degree of
increased or decreased prepayment risk depends upon the structure of the CMOs.
However, the actual returns of any type of mortgage backed security depend upon
the performance of the underlying pool of mortgages, which no one can predict
and will vary among pools.

Sequential CMOs

ASSET BACKED SECURITIES

Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass through certificates. Asset backed securities have prepayment
risks. As with CMOs, the cash flows of asset backed securities may be highly
structured.

BANK INSTRUMENTS

CREDIT ENHANCEMENT

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

* Prices of fixed income securities rise and fall in response to changes in the
interest rate paid on newly-issued similar securities. Generally, when interest
rates rise, prices of fixed income securities fall. However, market factors,
such as the demand for particular fixed income securities, may cause the price
of certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.

CREDIT RISKS

* Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

* Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the premium received for accepting this risk. Spreads may increase
generally in response to adverse economic or market conditions. A security's
spread may also increase if the security's rating is lowered, or the security is
perceived to have an increased credit risk. An increase in the spread will cause
the price of the security to decline.

PREPAYMENT RISKS

* Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities with higher interest rates. Conversely, prepayments due to
refinancings decrease when mortgage rates increase. This extends the life of
mortgage backed securities with lower interest rates. Other economic factors can
also lead to increases or decreases in prepayments. Increases in prepayments of
high interest rate mortgage backed securities, or decreases in prepayments of
lower interest rate mortgage backed securities, may increase their yield and/or
reduce their price. These factors, particularly the relationship between
interest rates and mortgage prepayments makes the price of mortgage backed
securities more volatile than many other types of fixed income securities with
comparable credit risks.

* Mortgage backed securities generally compensate for greater prepayment risk by
paying a higher yield. The difference between the yield of a mortgage backed
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the premium received for accepting such risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security is perceived to have an
increased prepayment risk or perceived to have less market demand. An increase
in the spread will cause the price of the security to decline.

* The Fund may have to reinvest the proceeds of mortgage prepayments in other
fixed income securities with lower interest rates, higher prepayment risks, or
other less favorable characteristics.

What Do Shares Cost?

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Service Shares. Each share class
has different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.

RULE 12B-1 PLAN

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed; and

* signatures of all shareholders exactly as registered.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days; or

* a redemption is payable to someone other than the shareholder(s) of
record.

* A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

PAYMENT METHODS FOR REDEMPTIONS

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you
will receive periodic statements reporting all account activity, including
dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.

Who Manages the Fund?

THE FUND'S PORTFOLIO MANAGERS ARE:

RANDALL S. BAUER

ROBERT E. CAULEY

ADVISORY FEES

YEAR 2000 READINESS

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. However, this may be difficult with certain issuers. For example,
funds dealing with foreign service providers or investing in foreign securities
will have difficulty determining the Year 2000 readiness of those entities. This
is especially true of entities or issuers in emerging markets. The financial
impact of these issues for the Fund is still being determined. There can be no
assurance that potential Year 2000 problems would not have a material adverse
effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements is included in the Annual Report.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING

OF PERIOD $ 8.74 $ 8.68 $ 8.68 $ 8.61 $ 8.85
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income 0.50 0.50 0.53 0.54 0.52
Net realized and
unrealized gain (loss) on
investments (0.07) 0.06 - 0.07 (0.24)
TOTAL FROM INVESTMENT

OPERATIONS 0.43 0.56 0.53 0.61 0.28
LESS DISTRIBUTIONS:

Distributions from net

investment income (0.50) (0.50) (0.53) (0.54) (0.52)
NET ASSET VALUE, END OF

PERIOD $ 8.67 $ 8.74 $ 8.68 $ 8.68 $ 8.61
TOTAL RETURN 1 4.99% 6.61% 6.27% 7.25% 3.29%

RATIOS TO AVERAGE NET

ASSETS:

Expenses 2 1.09% 1.09% 1.09% 1.10% 1.08%
Net investment income 2 5.35% 5.45% 5.68% 5.88% 5.63%
Expenses (after waivers) 0.81% 0.81% 0.81% 0.81% 0.81%
Net investment income
(after waivers) 5.63% 5.73% 5.96% 6.17% 5.90%
SUPPLEMENTAL DATA:
Net assets, end of period

(000 omitted) $24,783 $14,783 $17,586 $16,346 $17,091
Portfolio turnover 54% 49% 55% 77% 38%

</TABLE>

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

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated April 30, 1999, which can be obtained free of charge.

[Graphic]
Federated

World-Class Investment Manager

PROSPECTUS

Federated Short-Term Income Fund

A Portfolio of Federated

Income Securities Trust

INSTITUTIONAL SERVICE SHARES

AUGUST 31, 1999

[Graphic]
Federated

Federated Short-Term Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-4577

Cusip 31420C308

1111903A-SS (8/99)

[Graphic]

STATEMENT OF ADDITIONAL INFORMATION

Federated Short-Term Income Fund

A Portfolio of Federated Income Securities Trust

INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Federated Short-Term Income Fund
(Fund), dated August 31, 1999. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400.

AUGUST 31, 1999

[Graphic]
Federated

World-Class Investment Manager
Federated Short-Term Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

1111903B (8/99)

[Graphic]

CONTENTS

How is the Fund Organized? 1

Securities in Which the Fund Invests 1

What Do Shares Cost? 7

How is the Fund Sold? 8

Subaccounting Services 8

Redemption in Kind 8

Massachusetts Partnership Law 9

Account and Share Information 9

Tax Information 9

Who Manages and Provides Services to the Fund? 10

How Does the Fund Measure Performance? 13

Who is Federated Investors, Inc.? 14

Financial Information 15

Investment Ratings 15

Addresses 18

How is the Fund Organized?

Securities in Which the Fund Invests

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

CORPORATE DEBT SECURITIES

Corporate debt securities are fixed income securities issued by businesses.
Notes, Bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.

COMMERCIAL PAPER

DEMAND INSTRUMENTS

MORTGAGE BACKED SECURITIES

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

SEQUENTIAL CMOS

PACS, TACS AND COMPANION CLASSES

IOS AND POS

FLOATERS AND INVERSE FLOATERS

Z CLASSES AND RESIDUAL CLASSES

ASSET BACKED SECURITIES

ZERO COUPON SECURITIES

There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs, IOs, and POs are
the most common forms of stripped zero coupon securities. In addition, some
securities give the issuer the option to deliver additional securities in place
of cash interest payments, thereby increasing the amount payable at maturity.
These are referred to as pay-in- kind or PIK securities.

BANK INSTRUMENTS

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and Banker's acceptances. Yankee instruments are denominated in
U.S. dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-
U.S. branches of U.S. or foreign banks.

CREDIT ENHANCEMENT

DERIVATIVE CONTRACTS

The Fund may trade in the following types of derivative contracts.

SWAPS

Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most
swaps do not involve the delivery of the underlying assets by either party, and
the parties might not own the assets underlying the swap. The payments are
usually made on a net bases so that, on any given day, the Fund would receive
(or pay) only the amount by which its payment under the contract is less than
(or exceeds) the amount of the other party's payment. Swap agreements are
sophisticated instruments that can take many different forms, and are known by a
variety of names including caps, floors, and collars. Common swap agreements
that the Fund may use include:

Interest Rate Swaps

Caps and Floors

Caps and Floors are contracts in which one party agrees to make payments only if
an interest rate or index goes above (Cap) or below (Floor) a certain level in
return for a fee from the other party.

Total Return Swaps

Total return swaps are contracts in which one party agrees to make payments of
the total return from the underlying asset

during the specified period, in return for payments equal to a fixed or floating
rate of interest or the total return from another underlying asset.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are subject to credit risks.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing y the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

DELAYED DELIVERY TRANSACTIONS

SECURITIES LENDING

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.

Securities lending activities are subject to interest rate risks and credit
risks.

ASSET COVERAGE

In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations without entering into an offsetting derivative contract or
terminating a special transaction. This may cause the Fund to miss favorable
trading opportunities or to realize losses on derivative contracts or special
transactions.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

INTEREST RATE RISKS

CREDIT RISKS

* Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

CALL RISKS

PREPAYMENT RISKS

* The Fund may have to reinvest the proceeds of mortgage prepayments in other
fixed income securities with lower interest rates, higher prepayment risks, or
other less favorable characteristics.

LIQUIDITY RISKS

* Trading opportunities are more limited for fixed income securities that have
not received any credit ratings, have received ratings below investment grade or
are not widely held.

* OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

RISKS ASSOCIATED WITH COMPLEX CMOS

RISKS OF FOREIGN INVESTING

* Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.

* Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent the Fund and its Adviser from obtaining information concerning foreign
companies that is as frequent, extensive and reliable as the information
available concerning companies in the United States.

* Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.

LEVERAGE RISKS

* Investments can have these same results if their returns are based on a
multiple of a specified index, security, or other benchmark.

FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek to provide current income. The
investment objective may not be changed by the Fund's Directors without
shareholder approval.

The Fund will invest primarily in a diversified portfolio of short and
medium-term high grade debt securities.

The Fund will limit its purchase of securities on a when issued or delayed
delivery basis to no more than 20% of the value of its total assets.

INVESTMENT LIMITATIONS

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities if as a result of such purchase 25% or
more of the value of its total assets would be invested in any one industry.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities or commodity contracts, including
futures contracts.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate including limited partnership
interests in real estate, although it may invest in the securities of companies
whose business involves the purchase or sale of real estate or in securities
which are secured by real estate or interests in real estate.

BUYING ON MARGIN

The Fund will not purchase any securities on margin but may obtain such
short-term credits as are necessary for the clearance of transactions.

SELLING SHORT

The Fund will not sell securities short unless: during the time the short
position is open, it owns an equal amount of the securities sold or securities
readily and freely convertible into or exchangeable, without payment of
additional consideration, for securities of the same issue as, and equal in
amount to, the securities sold short; and not more than 10% of the Fund's net
assets (taken at current value) is held as collateral for such sales at any one
time.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities, except that the Fund may borrow money
and engage in reverse repurchase agreements in amounts up to one-third of the
value of its total assets, including the amounts borrowed.

The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure to facilitate management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any securities while
any borrowings, other than reverse repurchase agreements, are outstanding.
During the period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase agreements,
the Fund will restrict the purchase of portfolio instruments to money market
instruments maturing on or before the expiration date of the reverse repurchase
agreements.

PLEDGING ASSETS

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the purchase
or holding of corporate 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 Declaration of Trust. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the investment adviser has
determined are creditworthy under guidelines established by the Trustees and
will receive collateral equal to at least 100% of the value of the securities
loaned.

UNDERWRITING

INVESTING IN MINERALS

The Fund will not purchase interests in oil, gas, or other mineral exploration
or development programs, or leases, although it may purchase the securities of
issuers which invest in or sponsor such programs.

INVESTING IN NEW ISSUERS

The Fund will not invest more than 5% of the value of its total assets in
securities of companies, including their predecessors, that have been in
operation for less than three years.

INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND
TRUSTEES OF THE TRUST

The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser owning individually
more than -1/2 of 1% of the issuer's securities together own more than 5% of the
issuer's securities.

DIVERSIFICATION OF INVESTMENTS

The Fund will not purchase the securities of any issuer (other than the U.S.
government, its agencies, or instrumentalities or instruments secured by the
securities of such issuers, such as repurchase agreements) if, as a result, more
than 5% of the value of its assets would be invested in the securities of such
issuer with respect to 75% of its total assets, or acquire more than 10% of any
class of voting securities of any issuer. For these purposes the Fund takes all
common stock and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other differences.

ACQUIRING SECURITIES

The Fund will not purchase securities of a company for the purpose of exercising
control or management.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

During the fiscal year ended April 30, 1999, the Fund did not borrow money,
invest in reverse repurchase agreements or sell securities short in excess of 5%
of the value of its net assets. The Fund does not intend to borrow money, invest
in reverse repurchase agreements, or sell securities short in excess of 5% of
the value of its net assets during the coming year.

For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items."

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

* for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

* for all other securities at fair value as determined in good faith by the
Board.

TRADING IN FOREIGN SECURITIES

What Do Shares Cost?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

How is the Fund Sold?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous,

best-efforts basis.

RULE 12B-1 PLAN (INSTITUTIONAL SERVICE SHARES)

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

Investment professionals receive such fees for providing

distribution-related or shareholder services such as sponsoring sales, providing
sales literature, conducting training seminars for employees, and engineering
sales-related computer software programs and systems. Also, investment
professionals may be paid cash or promotional incentives, such as reimbursement
of certain expenses relating to attendance at informational meetings about the
Fund or other special events at recreational-type facilities, or items of
material value. These payments will be based upon the amount of Shares the
investment professional sells or may sell and/or upon the type and nature of
sales or marketing support furnished by the investment professional.

Subaccounting Services

Redemption in Kind

Massachusetts Partnership Law

Account and Share Information

VOTING RIGHTS

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

As of August 6, 1999, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Institutional Shares: Charles Schwab & Co.
Inc., San Francisco, CA owned 3,034,891 shares (12.71%); Community Savings FA,

Riviera Beach, FL owned 1,734,785 shares (7.26%); and Milards & Co., c/o SEI
Trust Company, Oaks, PA owned 1,239,580 shares (5.19%).

As of August 6, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Service
Shares: Planmember Services Corp. a/o City National Bank, Beverly Hills, CA
owned 1,128,581 shares (40.94%); and TRUCOJO Trust Company of St. Joseph,

St. Joseph, MO owned 638,107 shares (23.15%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

Tax Information

FEDERAL INCOME TAX

FOREIGN INVESTMENTS

Who Manages and Provides Services to the Fund?

BOARD OF TRUSTEES

As of August 6, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Institutional Shares and Institutional Service
Shares.

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM TRUST
POSITION WITH TRUST FOR PAST FIVE YEARS FROM TRUST AND FUND COMPLEX
<S> <C> <C> <C>
John F. Donahue*+ Chief Executive Officer $0 $0 for the Trust and
Birth Date: July 28, 1924 and Director or Trustee of 54 other investment
Federated Investors Tower the Federated Fund companies in the
1001 Liberty Avenue Complex; Chairman and Fund Complex
Pittsburgh, PA Director, Federated
CHAIRMAN AND TRUSTEE Investors, Inc.; Chairman
and Trustee, Federated Investment Management
Company; Chairman and Director, Federated
Investment Counseling, and Federated Global
Investment Management Corp.; Chairman,
Passport Research, Ltd.

THOMAS G. BIGLEY Director or Trustee of the Federated Fund $1286.01 $113,860.22 for the Trust
Birth Date: February 3, 1934 Complex; Director, Member of Executive and 54 other investment
15 Old Timber Trail Committee, Children's Hospital of Pittsburgh; Fund Complex
Pittsburgh, PA companies in the
TRUSTEE Director, Robroy Industries, Inc. (coated steel
conduits/computer storage equipment);
formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of
Executive Committee, University of Pittsburgh.

JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1414.81 $125,264.48 for the Trust
Birth Date: June 23, 1937 Complex; President, Investment Properties and 54 other investment
Wood/Commercial Dept. Corporation; Senior Vice President, companies in the
John R. Wood Associates, John R. Wood and Associates, Inc., Realtors; Fund Complex
Inc. Realtors Partner or Trustee in private real estate ventures
3255 Tamiami Trail North in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and
TRUSTEE Northgate Village Development Corporation.

NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $329.67 $47,958.02 for the Trust
Birth Date: September 3, 1939 Complex; formerly: Partner, Andersen and 39 other investment
175 Woodshire Drive Worldwide SC. companies in the
Pittsburgh, PA Fund Complex
TRUSTEE

JOHN F. CUNNINGHAM++ Director or Trustee of some of the Federated $0 $0 for the Trust
Birth Date: March 5, 1943 Fund Complex; Chairman, President and Chief and 43 other investment
353 El Brillo Way Executive Officer, Cunningham & Co., Inc. companies in the
Palm Beach, FL (strategic business consulting); Trustee Fund Complex
TRUSTEE Associate, Boston College; Director, EMC
Corporation (computer storage systems);
formerly: Director, Redgate Communications.
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer, Inc.

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $1286.01 $113,860.22 for the Trust
Birth Date: October 11, 1932 Complex; Professor of Medicine, University of and 54 other investment
3471 Fifth Avenue Pittsburgh; Medical Director, University of companies in the
Suite 1111 Pittsburgh Medical Center - Downtown; Fund Complex
Pittsburgh, PA Hematologist, Oncologist, and Internist,
TRUSTEE University of Pittsburgh Medical Center;

Member, National Board of Trustees, Leukemia
Society of America.

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM TRUST
POSITION WITH TRUST FOR PAST FIVE YEARS FROM TRUST AND FUND COMPLEX
<S> <C> <C> <C>
PETER E. MADDEN Director or Trustee of the $1286.01 $113,860.22 for the Trust
Birth Date: March 16, 1942 Federated Fund Complex; and 54 other investment
One Royal Palm Way formerly: Representative, companies in the
100 Royal Palm Way Commonwealth of Fund Complex
Palm Beach, FL Massachusetts General
TRUSTEE Court; President, State
Street Bank and Trust
Company and State Street
Corporation.
Previous Positions:
Director, VISA USA and VISA
International; Chairman
and Director,
Massachusetts Bankers
Association; Director,
Depository Trust
Corporation; Director, The
Boston Stock Exchange.

JOHN E. MURRAY, JR., J.D., S.J.D. Director or Trustee of the Federated Fund $1286.01 $113,860.22 for the Trust
Birth Date: December 20, 1932 Complex; President, Law Professor, Duquesne and 54 other investment
President, Duquesne University University; Consulting Partner, Mollica & companies in the
Pittsburgh, PA Murray; Director, Michael Baker Fund Complex
TRUSTEE Corp. (engineering, construction, operations,

and
technical services).

Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean
and Professor of Law, Villanova University

School of Law.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund $1286.01 $113,860.22 for the Trust
Birth Date: June 21, 1935 Complex; Public Relations/Marketing/ and 54 other investment
4905 Bayard Street Conference Planning. companies in the
Pittsburgh, PA Previous Positions: National Spokesperson, Fund Complex
TRUSTEE Aluminum Company of America; television
producer, business owner.

GLEN R. JOHNSON Trustee, Federated Investors, Inc.; staff member, $0 $0 for the Trust
Birth Date: May 2, 1929 Federated Securities Corp. and 8 other investment
Federated Investors Tower companies in the
1001 Liberty Avenue Fund Complex
Pittsburgh, PA

PRESIDENT

J. CHRISTOPHER DONAHUE+ President or Executive Vice President of the $0 $0 for the Trust
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of and 22 other investment
Federated Investors Tower some of the Funds in the Federated Fund companies in the
1001 Liberty Avenue Complex; President and Director, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; President and Trustee, Federated
EXECUTIVE VICE-PRESIDENT Investment Management Company; President
and Director, Federated Investment Counseling
and Federated Global Investment Management
Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services
Company; Director, Federated Services

Company.

EDWARD C. GONZALES Trustee or Director of some of the Funds in the $0 $0 for the Trust
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive and 1 other investment
Federated Investors Tower Vice President and Treasurer of some of the company in the
1001 Liberty Avenue Funds in the Federated Fund Complex; Vice Fund Complex
Pittsburgh, PA Chairman, Federated Investors, Inc.; Vice
EXECUTIVE VICE-PRESIDENT President, Federated Investment Management
Company and Federated Investment
Counseling, Federated Global Investment
Management Corp. and Passport Research,
Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the Trust
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice and 54 other investment
Federated Investors Tower President, Secretary, and Director, Federated companies in the
1001 Liberty Avenue Investors, Inc.; Trustee, Federated Investment Fund Complex
Pittsburgh, PA Management Company; Director, Federated
EXECUTIVE VICE-PRESIDENT Investment Counseling and Federated Global
AND SECRETARY Investment Management Corp.; Director,
Federated Services Company; Director,
Federated Securities Corp.

RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the Trust
Birth Date: June 17, 1954 President-Funds Financial Services Division, and 54 other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various companies in the
1001 Liberty Avenue management positions within Funds Financial Fund Complex
Pittsburgh, PA Services Division of Federated Investors, Inc.

TREASURER

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM TRUST
POSITION WITH TRUST FOR PAST FIVE YEARS FROM TRUST AND FUND COMPLEX
<S> <C> <C> <C>

RICHARD B. FISHER President or Vice $0 $0 for the Trust
Birth Date: May 17, 1923 President of some of the and 6 other investment
Federated Investors Tower Funds in the Federated Fund companies in the
1001 Liberty Avenue Complex; Director or Fund Complex
Pittsburgh, PA Trustee of some of the
VICE-PRESIDENT Funds in the Federated Fund
Complex; Executive Vice
President, Federated
Investors, Inc.; Chairman
and Director, Federated
Securities Corp.

WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the Trust
Birth Date: March 3, 1949 various other Funds in the Federated Fund and 41 other investment
Federated Investors Tower Complex; Executive Vice President, Federated companies in the
1001 Liberty Avenue Investment Counseling, Federated Global Fund Complex
Pittsburgh, PA Investment Management Corp., Federated
CHIEF INVESTMENT OFFICER Investment Management Company and
Passport Research, Ltd.; Registered
Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated
Investors, Inc.; formerly: Executive Vice
President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division;
Senior Vice President, Federated Investment
Management Company and Passport Research,
Ltd.

JOSEPH M. BALESTRINO Joseph M. Balestrino has been the Fund's $0 $0 for the [Fund/
Birth Date: November 3, 1954 portfolio manager since January 1994. He is Corporation/ Trust] and
Federated Investors Tower Vice President of the Trust. Mr. Balestrino joined 3 other investment
1001 Liberty Avenue Federated in 1986 and has been a Senior companies in the
Pittsburgh, PA Portfolio Manager and Senior Vice President of Fund Complex
VICE PRESIDENT the Fund's Adviser since 1998. He was a
Portfolio Manager and a Vice President of the
Fund's Adviser from 1995 to 1998.
Mr. Balestrino served as a Portfolio Manager
and an Assistant Vice President of the Adviser
from 1993 to 1995. Mr. Balestrino is a Chartered
Financial Analyst and received his Master's
Degree in Urban and Regional Planning from
the University of Pittsburgh.

RANDALL S. BAUER Randall S. Bauer has been the Fund's portfolio $0 $0 for the Trust
Birth Date: November 16, 1957 manager since October 1995. He is Vice and 1 other investment
Federated Investors Tower President of the Trust. Mr. Bauer joined company in the
1001 Liberty Avenue Federated in 1989 and has been a Portfolio Fund Complex
Pittsburgh, PA Manager and a Vice President of the Fund's
VICE PRESIDENT Adviser since 1994. Mr. Bauer is a Chartered
Financial Analyst and received his M.B.A. in
Finance from Pennsylvania State University.

</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice-
President of the Trust.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to the Fund or any Fund shareholder 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 Fund.

OTHER RELATED SERVICES

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

ADMINISTRATOR

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

shareholders.

INDEPENDENT AUDITORS

The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED APRIL 30 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $845,655 $871,326 $957,140
Advisory Fee Reduction 58,212 73,876 72,703
Brokerage Commissions 0 0 0
Administrative Fee 159,406 164,374 180,791
12B-1 FEE

Institutional Service Shares 1,838 - -
SHAREHOLDER SERVICES FEE

Institutional Shares 0 - -
Institutional Service Shares 44,118 - -
</TABLE>

How Does the Fund Measure Performance?

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year, five-year, ten-year and Start of
Performance periods ended April 30, 1999.

Yield given for the 30-Day period ended April 30, 1999.

30-DAY

SHARE CLASS PERIOD 1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>

INSTITUTIONAL SHARES:

Total Return NA 5.25% 5.94% 6.22%
Yield 6.12% NA NA NA

START OF

30-DAY PERFORMANCE ON

SHARE CLASS PERIOD 1 YEAR 5 YEARS JANUARY 24, 1992
<S> <C> <C> <C> <C>
INSTITUTIONAL SERVICE SHARES:

Total Return NA 4.99% 5.67% 5.35%
Yield 5.72% NA NA NA

</TABLE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

YIELD

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

* references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

* discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Funds; and

* information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

* LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in NAV over a specific period of time. From time to
time, the Fund will quote its Lipper ranking in the "short-term investment grade
debt funds" category in advertising and sales literature.

* MERRILL LYNCH TOTAL RETURN INVESTMENT GRADE CORPORATE INDEX (Short- Term
1-2.99 Years) is comprised of over 400 issues of investment grade corporate debt
securities with remaining maturities from 1 to 2.99 years.

* 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.

Who is Federated Investors, Inc.?

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

EQUITY FUNDS

CORPORATE BOND FUNDS

Federated was one of the first fund managers to participate in the asset backed
securities market, a market totaling more than $209 billion.

GOVERNMENT FUNDS

MONEY MARKET FUNDS

MUTUAL FUND MARKET

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Financial Information

The Financial Statements for the Fund for the fiscal year ended April 30, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
Federated Short-Term Income Fund dated April 30, 1999.

Investment Ratings

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
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.

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

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

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

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

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

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

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

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

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

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

* Leading market positions in well-established industries;

* High rates of return on funds employed;

* Conservative capitalization structure with moderate reliance on debt and
ample asset protection;

* Broad margins in earning coverage of fixed financial charges and high
internal cash generation; and

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

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

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

FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS

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

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

Addresses

FEDERATED SHORT-TERM INCOME FUND

Institutional Shares
Institutional Service Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR

Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT AUDITORS

Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072

PART C. OTHER INFORMATION.

Item 23. EXHIBITS:

(a) (i) Conformed copy of Amended and Restated
Declaration of Trust of the Registrant; +
(ii) Conformed copy of Amendment No. 2 to the
Declaration of Trust of the Registrant; (6)
(iii) Conformed copy of Amendment No. 3 to the
Declaration of Trust of the Registrant; (9)
(iv) Conformed copy of Amendment No. 4 to the
Declaration of Trust of the Registrant; +
(v) Conformed copy of Amendment No. 5 to the
Declaration of Trust of the Registrant; (11)
(vi) Conformed copy of Amendment No. 6 to the
Declaration of Trust of the Registrant; (11)
(vii) Conformed copy of Amendment No. 7 to the
Declaration of Trust of the Registrant;(11)
(b) (i) Copy of Amended and Restated By-Laws of the
Registrant; (6)
(ii) Copy of Amendment No. 4 to the By-Laws of
the Registrant; (11)
(iii) Copy of Amendment No. 5 to the By-Laws of
the Registrant; (11)
(iv) Copy of Amendment No. 6 to the By-Laws of
the Registrant; (11)
(v) Copy of Amendment No. 7 to the By-Laws of
the Registrant; (11)
(c) Copy of Specimen Certificate for Shares of
Beneficial Interest of the Registrant; (8)
(d) (i) Conformed copy of Investment Advisory
Contract of the Registrant; +
(ii) Conformed copy of Exhibit B to the
Investment Advisory Contract of the
Registrant; +
(e) (i) Conformed copy of Distributor's Contract of
the Registrant; +
(ii) Conformed copy of Exhibit A to the
Distributor's Contract of the Registrant; +
(iii) Conformed copy of Exhibit B to the
Distributor's Contract of the Registrant; +

+ All exhibits are being filed electronically.

6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed April 30, 1993. (File Nos. 33-3164 and
811-4577).

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed June 7, 1994. (File Nos. 33-3164 and
811-4577).

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed June 24, 1994. (File Nos. 33-3164 and
811-4577).

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed June 29, 1998. (File Nos. 33-3164 and
811-4577).

<PAGE>

(iv) Conformed copy of Exhibit C to Distributor's Contract of the Registrant;
(8)

(v) Conformed copy of Exhibit D to Distributor's Contract of the Registrant;
(8)

(vi) The Registrant hereby incorporates the conformed copy of the specimen
Mutual Funds Sales and Service Agreement; Mutual Funds Service Agreement;
and Plan/Trustee Mutual Funds Service Agreement from Item 24(b)(6) of the
Cash Trust Series II Registration Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Nos. 33-38550 and 811-6269).

(f) Not applicable;

(g) (i) Conformed copy of Custodian Agreement of
the Registrant; (10)
(ii) Conformed copy of Custodian Fee
Schedule; (11)
(h) (i) Conformed copy of Amended and Restated
Agreement for Fund Accounting Services,
Administrative Services, Shareholder
Transfer Agency Services and Custody
Services Procurement; (11)
(ii) Conformed copy of Amended and Restated
Shareholder Services Agreement; (11)
(iii) The responses and exhibits described in
Item 23(e)(v) are hereby incorporated by
reference;

(iv) The Registrant hereby incorporates by
reference the conformed copy of the
Shareholder Services Sub-Contract between Fidelity and Federated
Shareholder Services from Item 24(b)(9)(iii) of Federated GNMA Trust
Registration Statement on Form N-1A, filed with the Commission on March
25, 1996. (File Nos. 2-75670 and 811-3375).

(i) Not applicable;
(j) Conformed copy of Consent of Independent
Public Accountants; +
(k) Not applicable;
(l) Not applicable;

+ All exhibits are being filed electronically.

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed June 7, 1994. (File Nos. 33-3164 and
811-4577).

10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed June 23, 1995. (File Nos. 33-3164 and
811-4577).

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed June 29, 1998. (File Nos. 33-3164 and
811-4577).

<PAGE>

(m) (i) Conformed copy of Distribution Plan of the
Registrant; (5)
(ii) Conformed copy of Exhibit B to Distribution
Plan of the Registrant; (7)
(iii) The responses described in Item 23(e)(v) are
hereby incorporated by reference;

(n) The Registrant hereby incorporates the
conformed copy of specimen Multiple Class
Plan from Item 24(b)(18) of the World
Investment Series, Inc. Registration
Statement on Form N-1A, filed with the
Commission on January 26, 1996.
(File Nos. 33-52149 and 811-07141).

(o) (i) Conformed copy of Power of Attorney of the
Registrant; (12)
(ii) Conformed copy of Power of Attorney of Chief
Investment Officer of the Registrant; (12)
(iii) Conformed copy of Power of Attorney of
Trustee of the Registrant; (12)

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND:

None

Item 25. INDEMNIFICATION: (4)

Item 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER:

For a description of the other business of the investment
adviser, see the section entitled "Who Manages the Fund?" in Part
A. The affiliations with the Registrant of four of the Trustees
and one of the Officers of the investment adviser are included in
Part B of this Registration Statement under "Who Manages and
Provides Services to the Fund?" The remaining Trustee of the
investment adviser, his position with the investment adviser,
and, in parentheses, his principal occupation is: Mark D. Olson
(Partner, Wilson, Halbrook & Bayard), 107 W. Market Street,
Georgetown, Delaware 19947.

4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed June 25, 1991. (File Nos. 33-3164 and
811-4577).

5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed December 9, 1991. (File Nos. 33-3164
and 811-4577).

7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed October 12, 1993. (File Nos. 33-3164
and 811-4577).

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed June 25, 1999. (File Nos. 33-3164 and
811-4577).

<PAGE>

The remaining Officers of the investment adviser are:

Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden

Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Michael P. Donnelly
Mark E. Durbiano
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
G. Andrew Bonnewell
Micheal W. Casey
Robert E. Cauley
Kenneth J. Cody
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Marc Halperin
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
Stephen A. Keen
Robert M. Kowit
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
William M. Painter
Jeffrey A. Petro
Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Peter Vutz
Paige M. Wilhelm
George B. Wright
Jolanta M. Wysocka

<PAGE>

Assistant Vice Presidents: Nancy J. Belz
Lee R. Cunningham, II
James H. Davis, II
Jacqueline A. Drastal
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Farwell
Eamonn G. Folan
John T. Gentry
John W. Harris
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
Ihab Salib
James W. Schaub
John Sheehy
Matthew K. Stapen
Diane Tolby
Timothy G. Trebilcock
Leonardo A. Vila
Steven J. Wagner
Lori A. Wolff

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher

Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
investment companies in the Federated Fund Complex described in
Part B of this Registration Statement.

Item 27. PRINCIPAL UNDERWRITERS:

(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end
investment companies, including the Registrant:

Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated
U.S. Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income
Securities, Inc.; ; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Managed Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds;
SouthTrust Funds; Tax-Free Instruments Trust; The Planters Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Vision Group of Funds, Inc.; World
Investment Series, Inc.; Blanchard Funds; Blanchard Precious Metals Fund, Inc.;
DG Investor Series; High Yield Cash Trust; Investment Series Trust; Star Funds;
Targeted Duration Trust; The Virtus Funds; Trust for Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard B. Fisher Chairman, Chief Executive Vice President
Federated Investors Tower Officer, Chief Operating
1001 Liberty Avenue Officer, Asst. Secretary
Pittsburgh, PA 15222-3779 and Asst. Treasurer,
Federated Securities Corp.

Arthur L. Cherry Director --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward C. Gonzales Executive Vice President Executive
Federated Investors Tower Federated Securities Corp. Vice President
1001 Liberty Avenue

Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

Item 28. LOCATION OF ACCOUNTS AND RECORDS:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(Notices should be sent to the Agent for service at the above address)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Federated Shareholder Services Company P.O. Box 8600
("Transfer Agent and Dividend Boston, MA 02266-8600

Disbursing Agent)

Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue

Pittsburgh, PA 15222-3779

Federated Investment Management Company Federated Investors Tower
("Adviser") 1001 Liberty Avenue

Pittsburgh, PA 15222-3779

State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600

Item 29. MANAGEMENT SERVICES: Not applicable.

Item 30........UNDERTAKINGS:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to removal of Trustees
and the calling of special shareholder meetings by shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED INCOME SECURITIES
TRUST, certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 26th day of August,
1999.

FEDERATED INCOME SECURITIES TRUST

BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue

August 26, 1999

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By: /s/ C. Grant Anderson
C. Grant Anderson Attorney In Fact August 26, 1999
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

Glen R. Johnson* President

Richard J. Thomas* Treasurer
(Principal Financial and
Accounting Officer)

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

Nicholas P. Constantakis* Trustee

John F. Cunningham* Trustee

Lawrence D. Ellis, M.D.* Trustee

Peter E. Madden* Trustee

John E. Murray, Jr., J.D., S.J.D.* Trustee

Marjorie P. Smuts* Trustee

* By Power of Attorney

Exhibit (j) under N-1A
Exhibit 23 under Item 601/Reg SK

CONSENT OF INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Independent Auditors" in the Statements of
Additional Information in Post-Effective Amendment Number 32 to the Registration
Statement (Form N-1A No. 33-03164) dated August 31, 1999 and to the
incorporation by reference therein of our report dated June 21, 1999 on the
financial statements of Federated Income Securities Trust (comprising, Federated
Intermediate Income Fund, and Federated Short-Term Income Fund) included in its
Annual Report to Shareholders for the year ended April 30, 1999.

By: ERNST & YOUNG

/s/Ernst & Young

Boston, Massachusetts
August 26, 1999

Exhibit 3(i) (i) under Form N-1A
Exhibit (a) under Item 601/Reg. S-K

AMENDED AND RESTATED

DECLARATION OF TRUST

FEDERATED INCOME SECURITIES TRUST

(Formerly Federated Floating Rate Trust)

Dated December 31, 1991

AMENDED AND RESTATED DECLARATION OF TRUST made December 31, 1991 by JohnEF.
Donahue, John T. Conroy, Jr., William J. Copeland, James F. Dowd, LawrenceED.
Ellis, M.D., Edward L. Flaherty, Jr., Peter E. Madden, GregorEF.EMeyer, Wesley
W. Posvar, Marjorie P. Smuts, and John A. Staley, IV.

WHEREAS, pursuant to a Declaration of Trust dated January 24, 1986, the
Trustees established a trust fund named Federated Floating Rate Trust for the
investment and reinvestment of funds contributed thereto; and

WHEREAS, the Trustees now desire to amend and restate the Declaration of
Trust to, among other things, (a) change the name of the Trust to "Federated
Income Securities Trust," (b) allow the Trust to establish and designate series
and classes of shares and (c) to establish the Trust's current portfolio as a
Series Company named "Federated Short-Intermediate Income Fund."

NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust IN TRUST as herein set forth below.

ARTICLE I

NAMES AND DEFINITIONS

SECTION 1. NAME.

This Trust shall be known as Federated Income Securities Trust.

SECTION 2. DEFINITIONS.

Wherever used herein, unless otherwise required by the context or
specifically provided:

(a) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person," "Majority Shareholder Vote" (the 67% or 50%
requirement of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) and "Principal Underwriter" shall have the meanings given them
in the 1940 Act, as amended from time to time;

(b) The "Trust" refers to Federated Income Securities Trust;

(c) "Accumulated Net Income" means the accumulated net income of the
Trust determined in the manner provided or authorized in Article X, Section 3;

(d) "Class" refers to a class of Shares established and designated
under or in accordance with the provisions of Article III;

(e) "Series" refers to a series of Shares established and designated
under or in accordance with the provisions of Article III;

(f) "Series Company" refers to the form of a registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in any
successor statutory provision;

(g) "Shareholder" means a record owner of Shares of any Series or
Class;

(h) The "Trustees" refer to the individual Trustees in their capacity
as Trustees hereunder of the Trust and their successor or successors for
the time being in office as such Trustees;

(i) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
or if more than one Series or Class of Shares is authorized by the
Trustees, the equal proportionate units into which each Series or Class of
Shares shall be divided from time to time and includes fractions of Shares
as well as whole Shares; and

(j) The "1940 Act" refers to the Investment Company Act of 1940, and
the Rules and Regulations thereunder (including any exemptions granted
thereunder), as amended from time to time.

ARTICLE II

PURPOSE OF TRUST

The purpose of this Trust is to provide investors a continuous source of
managed investments by investing primarily in securities.

ARTICLE III

BENEFICIAL INTEREST

SECTION 1. SHARES OF BENEFICIAL INTEREST.

The beneficial interest in the Trust shall at all times be divided into
transferable Shares, without par value. Subject to the provisions of Section 5
of this Article III, each Share shall have voting rights as provided in Article
VIII hereof, and holders of the Shares of any Series shall be entitled to
receive dividends, when and as declared with respect thereto in the manner
provided in Article X, Section 1 hereof. The Shares of any Series may be issued
in two or more Classes, as the Trustees may authorize pursuant to Article XII,
Section 8 hereof. Unless the Trustees have authorized the issuance of Shares of
a Series in two or more Classes, each Share of a Series shall represent an equal
proportionate interest in the assets and liabilities of the Series with each
other Share of the same Series, none having priority or preference over another.
If the Trustees have authorized the issuance of Shares of a Series in two or
more Classes, then the Classes may have such variations as to dividend,
redemption, and voting rights, net asset values, expenses borne by the Classes,
and other matters as the Trustees have authorized provided that each Share of a
Class shall represent an equal proportionate interest in the assets and
liabilities of the Class with each other Share of the same Class, none having
priority or preference over another. The number of Shares authorized shall be
unlimited. The Trustees may from time to time divide or combine the Shares of
any Series or Class into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Series or Class.

SECTION 2. OWNERSHIP OF SHARES.

The ownership of Shares shall be recorded in the books of the Trust or a
transfer agent, which books shall be maintained separately for the Shares of
each Series or Class. The Trustees may make such rules as they consider
appropriate for the transfer of Shares and similar matters. The record books of
the Trust or any transfer agent, as the case may be, shall be conclusive as to
who are the Shareholders of each Series or Class and as to the number of Shares
of each Series or Class held from time to time by each.

<PAGE>

SECTION 3. INVESTMENT IN THE TRUST.

The Trustees shall accept investments in the Trust from such persons and on
such terms as they may from time to time authorize. After the date of the
initial contribution of capital (which shall occur prior to the initial public
offering of Shares), the number of Shares to represent the initial contribution
shall be considered as outstanding and the amount received by the Trustees on
account of the contribution shall be treated as an asset of the Trust to be
allocated among any Series or Classes in the manner described in Section 5(a) of
this Article. Subsequent to such initial contribution of capital, Shares
(including Shares which may have been redeemed or repurchased by the Trust) may
be issued or sold at a price which will net the relevant Series or Class, as the
case may be, before paying any taxes in connection with such issue or sale, not
less than the net asset value (as defined in Article X, SectionE3) thereof;
provided, however, that the Trustees may in their discretion impose a sales
charge upon investments in the Trust.

SECTION 4. NO PRE-EMPTIVE RIGHTS.

Shareholders shall have no pre-emptive or other right to subscribe to any
additional Shares or other securities issued by the Trust or to the Trustees.

SECTION 5. ESTABLISHMENT AND DESIGNATION OF SERIES OR CLASS.

Without limiting the authority of the Trustees set forth in Article XII,
Section 8, inter alia, to establish and designate any additional Series or Class
or to modify the rights and preferences of any existing Series or Class, the
Series and Classes shall be and are established and designated as:

Federated Short-Intermediate Income Fund

Institutional Service Shares

Institutional Shares SEE AMD. #2, DATED 1/23/92; SEE AMD. #3, DATED
11/23/93; SEE AMD. #5, DATED 5/25/95; SEE AMD. #6, DATED 8/23/95; SEE AMD. #7,

DATED 3/31/96.

Shares of any Series or Class established in this Section 5 shall have the
following relative rights and preferences:

(a) ASSETS BELONGING TO SERIES OR CLASS. All consideration received by
the Trust for the issue or sale of Shares of a particular Series or Class,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof from
whatever source derived, including, without limitation, any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that Series or
Class for all purposes, subject only to the rights of creditors, and shall
be so recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits and proceeds thereof, from whatever
source derived, including, without limitation, any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in whatever form
the same may be, are herein referred to as "assets belonging to" that
Series or Class. In the event that there are any assets, income, earnings,
profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series or Class (collectively
"General Assets"), the Trustees shall allocate such General Assets to,
between or among any one or more of the Series or Classes established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable, and any General Assets so
allocated to a particular Series or Class shall belong to that Series or
Class. Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all Series or Classes for all purposes.

(b) LIABILITIES BELONGING TO SERIES OR CLASS. The assets belonging to
each particular Series or Class shall be charged with the liabilities of
the Trust in respect to that Series or Class and all expenses, costs,
charges and reserves attributable to that Series or Class, and any general
liabilities of the Trust which are not readily identifiable as belonging
to any particular Series or Class shall be allocated and charged by the
Trustees to and among any one or more of the Series or Classes established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges and reserves so charged to a Series
or Class are herein referred to as "liabilities belonging to" that Series
or Class. Each allocation of liabilities belonging to a Series or Class by
the Trustees shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.

(c) DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS, REPURCHASES AND
INDEMNIFICATION. Notwithstanding any other provisions of this Declaration,
including, without limitation, Article X, no dividend or distribution
(including, without limitation, any distribution paid upon termination of
the Trust or of any Series or Class) with respect to, nor any redemption
or repurchase of, the Shares of any Series or Class shall be affected by
the Trust other than from the assets belonging to such Series or Class,
nor except as specifically provided in Section 1 of Article XI hereof,
shall any Shareholder of any particular Series or Class otherwise have any
right or claim against the assets belonging to any other Series or Class
except to the extent that such Shareholder has such a right or claim
hereunder as a Shareholder of such other Series or Class.

(d) VOTING. Notwithstanding any of the other provisions of this
Declaration, including, without limitation, Section 1 of Article VIII,
only Shareholders of a particular Series or Class shall be entitled to
vote on any matters affecting such Series or Class. Except with respect to
matters as to which any particular Series or Class is affected, all of the
Shares of each Series or Class shall, on matters as to which such Series
or Class is entitled to vote, vote with other Series or Classes so
entitled as a single class. Notwithstanding the foregoing, with respect to
matters which would otherwise be voted on by two or more Series or Classes
as a single class, the Trustees may, in their sole discretion, submit such
matters to the Shareholders of any or all such Series or Classes,
separately.

(e) FRACTION. Any fractional Share of a Series or Class shall carry
proportionately all the rights and obligations of a whole Share of that
Series or Class, including rights with respect to voting, receipt of
dividends and distributions, redemption of Shares and termination of the
Trust or of any Series or Class.

(f) EXCHANGE PRIVILEGE. The Trustees shall have the authority to
provide that the holders of Shares of any Series or Class shall have the
right to exchange said Shares for Shares of one or more other Series or
Classes in accordance with such requirements and procedures as may be
established by the Trustees.

(g) COMBINATION OF SERIES OR CLASSES. The Trustees shall have the
authority, without the approval of the Shareholders of any Series or
Class, unless otherwise required by applicable law, to combine the assets
and liabilities belonging to a single Series or Class with the assets and
liabilities of one or more other Series or Classes.

(h) ELIMINATION OF SERIES OR CLASSES. At any time that there are no
Shares outstanding of any particular Series or Class previously
established and designated, the Trustees may amend this Declaration of
Trust to abolish that Series or Class and to rescind the establishment and
designation thereof.

ARTICLE IV

THE TRUSTEES

SECTION 1. MANAGEMENT OF THE TRUST.

The business and affairs of the Trust shall be managed by the Trustees, and
they shall have all powers necessary and desirable to carry out that
responsibility. The Trustees who shall serve until the election of Trustees at
the Meeting of Shareholders subsequent to the initial public offering of Shares
shall be John F. Donahue, William J. Copeland, James E. Dowd, Edward L.
Flaherty, Jr., J. Joseph Maloney, Jr., Gregor F. Meyer, Wesley W. Posvar and
Marjorie P. Smuts.

SECTION 2. ELECTION OF TRUSTEES AT MEETING OF SHAREHOLDERS.

On a date fixed by the Trustees, which shall be subsequent to the initial
public offering of Shares, the Shareholders shall elect Trustees. The number of
Trustees shall be determined by the Trustees pursuant to Article IV, Section 5.

SECTION 3. TERM OF OFFICE OF TRUSTEES.

The Trustees shall hold office during the lifetime of this Trust, and until
its termination as hereinafter provided; except (a) that any Trustee may resign
his office at any time by written instrument signed by him and delivered to the
other Trustees, which shall take effect upon such delivery or upon such later
date as is specified therein; (b) that any Trustee may be removed at any time by
written instrument signed by at least two-thirds of the number of Trustees prior
to such removal, specifying the date when such removal shall become effective;
(c) that any Trustee who requests in writing to be retired or who has become
mentally or physically incapacitated may be retired by written instrument signed
by a majority of the other Trustees, specifying the date of his retirement; and
(d) a Trustee may be removed at any special meeting of Shareholders of the Trust
by a vote of two-thirds of the outstanding Shares.

SECTION 4. TERMINATION OF SERVICE AND APPOINTMENT OF TRUSTEES.

In case of the death, resignation, retirement, removal or mental or
physical incapacity of any of the Trustees, or in case a vacancy shall, by
reason of an increase in number, or for any other reason, exist, the remaining
Trustees shall fill such vacancy by appointing such other person as they in
their discretion shall see fit. Such appointment shall be effected by the
signing of a written instrument by a majority of the Trustees in office. Within
three months of such appointment, the Trustees shall cause notice of such
appointment to be mailed to each Shareholder at his address as recorded on the
books of the Trust. An appointment of a Trustee may be made by the Trustees then
in office and notice thereof mailed to Shareholders as aforesaid in anticipation
of a vacancy to occur by reason of retirement, resignation or increase in number
of Trustees effective at a later date, provided that said appointment shall
become effective only at or after the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted this Trust, the trust estate shall vest in the new
Trustee or Trustees, together with the continuing Trustees, without any further
act or conveyance, and he shall be deemed a Trustee hereunder. Any appointment
authorized by this Section 4 is subject to the provisions of Section 16(a) of
the 1940 Act.

<PAGE>

SECTION 5. TEMPORARY ABSENCE OF TRUSTEE.

Any Trustee may, by power of attorney, delegate his power for a period not
exceeding six months at any one time to any other Trustee or Trustees, provided
that in no case shall less than two of the Trustees personally exercise the
other power hereunder except as herein otherwise expressly provided.

SECTION 6. NUMBER OF TRUSTEES.

The number of Trustees, not less than three (3) nor more than twenty (20)
serving hereunder at any time, shall be determined by the Trustees themselves.

Whenever a vacancy in the Board of Trustees shall occur, until such vacancy
is filled or while any Trustee is physically or mentally incapacitated, the
other Trustees shall have all the powers hereunder and the certificate signed by
a majority of the other Trustees of such vacancy, absence or incapacity, shall
be conclusive, provided, however, that no vacancy which reduces the number of
Trustees below three (3) shall remain unfilled for a period longer than six
calendar months.

SECTION 7. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE.

The death, resignation, retirement, removal, or mental or physical
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.

SECTION 8. OWNERSHIP OF ASSETS.

The assets belonging to each Series or Class shall be held separate and
apart from any assets now or hereafter held in any capacity other than as
Trustee hereunder by the Trustees or any successor Trustee. All of the assets
belonging to each Series or Class or owned by the Trust shall at all times be
considered as vested in the Trustees. No Shareholder shall be deemed to have a
severable ownership interest in any individual asset belonging to any Series or
Class or owned by the Trust or any right of partition or possession thereof, but
each Shareholder shall have a proportionate undivided beneficial interest in a
Series or Class.

ARTICLE V

POWERS OF THE TRUSTEES

SECTION 1. POWERS.

The Trustees in all instances shall act as principals, and are and shall be
free from the control of the Shareholders. The Trustees shall have full power
and authority to do any and all acts and to make and execute any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust or a Series or Class. The Trustees
shall not be bound or limited by present or future laws or customs in regard to
trust investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Without limiting the foregoing, the
Trustees shall have the following specific powers and authority, subject to any
applicable limitation in this Declaration of Trust or in the By-Laws of the
Trust:

(a) To buy, and invest funds in their hands in, securities including,
but not limited to, common stocks, preferred stocks, bonds, debentures,
warrants and rights to purchase securities, certificates of beneficial
interest, money market instruments, notes or other evidences of
indebtedness issued by any corporation, trust or association, domestic or
foreign, or issued or guaranteed by the United States of America or any
agency or instrumentality thereof, by the government of any foreign
country, by any State of the United States, or by any political subdivision
or agency or instrumentality of any State or foreign country, or in
"when-issued" or "delayed-delivery" contracts for any such securities, or
in any repurchase agreement or to retain assets belonging to each and every
Series or Class in cash, and from time to time to change the investments of
the assets belonging to each Series or Class.

(b) To adopt By-Laws of the Trust not inconsistent with the Declaration
of Trust providing for the conduct of the business of the Trust and to
amend and repeal them to the extent that they do not reserve that right to
the Shareholders.

(c) To elect and remove such officers of the Trust and appoint and
terminate such agents of the Trust as they consider appropriate.

(d) To appoint or otherwise engage a bank or trust company as custodian
of any assets belonging to any Series or Class subject to any conditions
set forth in this Declaration of Trust or in the By-Laws.

(e) To appoint or otherwise engage transfer agents, dividend disbursing
agents, Shareholder servicing agents, investment advisers, sub-investment
advisers, principal underwriters, administrative service agents, and such
other agents as the Trustees may from time to time appoint or otherwise
engage.

(f) To provide for the distribution of any Shares of any Series or
Class either through a principal underwriter in the manner hereinafter
provided for or by the Trust itself, or both.

(g) To set record dates in the manner hereinafter provided for;

(h) To delegate such authority as they consider desirable to a
committee or committees composed of Trustees, including without limitation,
an Executive Committee, or to any officers of the Trust and to any agent,
custodian or underwriter.

(i) To sell or exchange any or all of the assets belonging to one or
more Series or Classes, subject to the provisions of Article XII,
Section 4(b) hereof.

(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper.

(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities.

(l) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or either
in its own name or in the name of a custodian or a nominee or nominees,
subject in either case to proper safeguards according to the usual
practice of Massachusetts trust companies or investment companies.

(m) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which belongs to any Series or Class; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern,
and to pay calls or subscriptions with respect to any security which
belongs to any Series or Class.

(n) To engage in and to prosecute, compound, compromise, abandon, or
adjust, by arbitration, or otherwise, any actions, suits, proceedings,
disputes, claims, demands, and things relating to the Trust, and out of
the assets belonging to any Series or Class to pay, or to satisfy, any
debts, claims or expenses incurred in connection therewith, including
those of litigation, upon any evidence that the Trustees may deem
sufficient (such powers shall include without limitation any actions,
suits, proceedings, disputes, claims, demands and things relating to the
Trust wherein any of the Trustees may be named individually and the
subject matter of which arises by reason of business for or on behalf of
the Trust).

(o) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for.

(p) To borrow money but only as a temporary measure for extra ordinary
or emergency purposes and then (a) only in amounts not in excess of 5% of
the value of its total assets or of the total assets of any Series which
makes such borrowing or (b) in any amount up to one-third of the value of
its total assets or of the total assets of any Series which makes such
borrowing, including the amount borrowed, in order to meet redemption
requests without immediately selling any portfolio securities. The Trust
or any Series may also enter into reverse repurchase agreements in amounts
not in excess of one-third of its total assets in order to meet redemption
requests without immediately selling any portfolio instruments. The
Trustees shall not pledge, mortgage or hypothecate the assets of the Trust
or of any Series, except in connection with any borrowing described in (a)
and (b) herein and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of the Trust's or such Series' total
assets at the time of such borrowing.

(q) From time to time to issue and sell the Shares of any Series or
Class either for cash or for property whenever and in such amounts as the
Trustees may deem desirable, but subject to the limitation set forth in
Section 3 of Article III.

(r) To purchase insurance of any kind, including, without limitation,
insurance on behalf of any person who is or was a Trustee, officer,
employee or agent of the Trust, or is or was serving at the request of the
Trust as a trustee, director, officer, agent or employee of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such.

No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees
or upon their order.

The Trustees shall have all of the powers set forth in this Section 1 with
respect to all assets and liabilities of each Series and Class.

SECTION 2. PRINCIPAL TRANSACTIONS.

The Trustees shall not cause the Trust on behalf of any Series or Class to
buy any securities (other than Shares) from or sell securities (other than
Shares) to, or lend any assets belonging to any Series or Class to any Trustee
or officer or employee of the Trust or any firm of which any such Trustee or
officer is a member acting as principal unless permitted by the 1940 Act, but
the Trust may employ any such other party or any such person or firm or company
in which any such person is an Interested Person in any capacity not prohibited
by the 1940 Act.

SECTION 3. TRUSTEES AND OFFICERS AS SHAREHOLDERS.

Any Trustee, officer or other agent of the Trust or any Series or Class may
acquire, own and dispose of Shares of any Series or Class to the same extent as
if he were not a Trustee, officer or agent; and the Trustees may issue and sell
or cause to be issued or sold Shares of any Series or Class to and buy such
Shares from any such person or any firm or company in which he is an interested
person subject only to the general limitations herein contained as to the sale
and purchase of such Shares; and all subject to any restrictions which may be
contained in the By-Laws.

SECTION 4. PARTIES TO CONTRACT.

The Trustees may enter into any contract of the character described in
Article VII or in Article IX hereof or any other capacity not prohibited by the
1940 Act with any corporation, firm, trust or association, although one or more
of the Shareholders, Trustees, officers, employees or agents of the Trust or any
Series or Class or their affiliates may be an officer, Director, Trustee,
Shareholder or Interested Person of such other party to the contract, and no
such contract shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust or any Series or Class under or by reason of said contract
or accountable for any profit realized directly or indirectly therefrom, in the
absence of actual fraud. The same person (including a firm, corporation, trust
or association) may be the other party to contracts entered into pursuant to
Article VII or Article IX or any other capacity not prohibited by the 1940 Act,
and any individual may be financially interested or otherwise an Interested
Person of persons who are parties to any or all of the contracts mentioned in
this Section 4.

ARTICLE VI

TRUSTEES' EXPENSES AND COMPENSATION

SECTION 1. TRUSTEE REIMBURSEMENT.

The Trustees shall be reimbursed from the assets belonging to each
particular Series or Class for all of such Trustees' expenses as such expenses
are allocated to and among any one or more of the Series or Classes pursuant to
Article III, Section 5(b), including, without limitation, expenses of organizing
the Trust or any Series or Class and continuing its or their existence; fees and
expenses of Trustees and officers of the Trust; fees for investment advisory
services, administrative services and principal underwriting services provided
for in Article VII, Sections 1, 2 and 3; fees and expenses of preparing and
printing Registration Statements under the Securities Act of 1933 and the 1940
Act and any amendments thereto; expenses of registering and qualifying the Trust
and any Series or Class and the Shares of any Series or Class under federal and
state laws and regulations; expenses of preparing, printing and distributing
prospectuses and any amendments thereto sent to Shareholders, underwriters,
broker-dealers and to investors who may be considering the purchase of Shares;
expenses of registering, licensing or other authorization of the Trust or any
Series or Class as a broker-dealer and of its or their officers as agents and
salesmen under federal and state laws and regulations; interest expense, taxes,
fees and commissions of every kind; expenses of issue (including cost of share
certificates), purchases, repurchases and redemptions of Shares, including
expenses attributable to a program of periodic issue; charges and expenses of
custodians, transfer agents, dividend disbursing agents, Shareholder servicing
agents and registrars; printing and mailing costs; auditing, accounting and
legal expenses; reports to Shareholders and governmental officers and
commissions; expenses of meetings of Shareholders and proxy solicitations
therefor; insurance expenses; association membership dues and nonrecurring items
as may arise, including all losses and liabilities by them incurred in
administering the Trust and any Series or Class, including expenses incurred in
connection with litigation, proceedings and claims and the obligations of the
Trust under Article XI hereof and the By-Laws to indemnify its Trustees,
officers, employees, Shareholders and agents, and any contract obligation to
indemnify principal underwriters under Section 3 of Article VII; and for the
payment of such expenses, disbursements, losses and liabilities, the Trustees
shall have a lien on the assets belonging to each Series or Class prior to any
rights or interests of the Shareholders of any Series or Class. This section
shall not preclude the Trust from directly paying any of the aforementioned fees
and expenses.

SECTION 2. TRUSTEE COMPENSATION.

The Trustees shall be entitled to compensation from the Trust from the
assets belonging to any Series or Class for their respective services as
Trustees, to be determined from time to time by vote of the Trustees, and the
Trustees shall also determine the compensation of all officers, consultants and
agents whom they may elect or appoint. The Trust may pay out of the assets
belonging to any Series or Class any Trustee or any corporation, firm, trust or
other entity of which a Trustee is an Interested Person for services rendered in
any capacity not prohibited by the 1940 Act, and such payments shall not be
deemed compensation for services as a Trustee under the first sentence of this
Section 2 of Article VI.

ARTICLE VII

INVESTMENT ADVISER, ADMINISTRATIVE SERVICES,

PRINCIPAL UNDERWRITER AND TRANSFER AGENT

SECTION 1. INVESTMENT ADVISER.

Subject to a Majority Shareholder Vote by the relevant Series or Class, the
Trustees may in their discretion from time to time enter into an investment
advisory contract whereby the other party to such contract shall undertake to
furnish the Trustees investment advisory services for such Series or Class upon
such terms and conditions and for such compensation as the Trustees may in their
discretion determine. Subject to a Majority Shareholder Vote by the relevant
Series or Class, the investment adviser may enter into a sub-investment advisory
contract to receive investment advice and/or statistical and factual information
from the sub-investment adviser for such Series or Class upon such terms and
conditions and for such compensation as the Trustees, in their discretion, may
agree. Notwithstanding any provisions of this Declaration of Trust, the Trustees
may authorize the investment adviser or sub-investment adviser or any person
furnishing administrative personnel and services as set forth in Article VII,
Section 2 (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales or exchanges of portfolio
securities belonging to a Series or Class on behalf of the Trustees or may
authorize any officer or Trustee to effect such purchases, sales, or exchanges
pursuant to recommendations of the investment adviser (and all without further
action by the Trustees). Any such purchases, sales and exchanges shall be deemed
to have been authorized by the Trustees. The Trustees may also authorize the
investment adviser to determine what firms shall be employed to effect
transactions in securities for the account of a Series or Class and to determine
what firms shall participate in any such transactions or shall share in
commissions or fees charged in connection with such transactions.

<PAGE>

SECTION 2. ADMINISTRATIVE SERVICES.

The Trustees may in their discretion from time to time contract for
administrative personnel and services whereby the other party shall agree to
provide the Trustees administrative personnel and services to operate the Trust
or a Series or Class on a daily basis, on such terms and conditions as the
Trustees may in their discretion determine. Such services may be provided by one
or more entities.

SECTION 3. PRINCIPAL UNDERWRITER.

The Trustees may in their discretion from time to time enter into an
exclusive or nonexclusive contract or contracts providing for the sale of the
Shares of a Series or Class to net such Series or Class not less than the amount
provided in Article III, Section 3 hereof, whereby a Series or Class may either
agree to sell the Shares to the other party to the contract or appoint such
other party its sales agent for such shares. In either case, the contract shall
be on such terms and conditions (including indemnification of principal
underwriters allowable under applicable law and regulation) as the Trustees may
in their discretion determine not inconsistent with the provisions of this
Article VII; and such contract may also provide for the repurchase or sale of
Shares of a Series or Class by such other party as principal or as agent of the
Trust and may provide that the other party may maintain a market for shares of a
Series or Class.

SECTION 4. TRANSFER AGENT.

The Trustees may in their discretion from time to time enter into transfer
agency and shareholder services contracts whereby the other party shall
undertake to furnish a transfer agency and shareholder services. The contracts
shall be on such terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Declaration of Trust or
of the By-Laws. Such services may be provided by one or more entities.

SECTION 5. PROVISIONS AND AMENDMENTS.

Any contract entered into pursuant to Sections 1 or 3 of this Article VII
shall be consistent with and subject to the requirements of Section 15 of the
1940 Act (including any amendments thereof or other applicable Act of Congress
hereafter enacted) with respect to its continuance in effect, its termination
and the method of authorization and approval of such contract or renewal
thereof.

ARTICLE VIII

SHAREHOLDERS' VOTING POWERS AND MEETINGS

SECTION 1. VOTING POWERS.

Subject to the provisions set forth in Article III, Section 5(d), the
Shareholders shall have power to vote, (i) for the election of Trustees as
provided in Article IV, Section 2; (ii) for the removal of Trustees as provided
in Article IV, Section 3(d); (iii) with respect to any investment adviser or
sub-investment adviser as provided in Article VII, Section 1; (iv) with respect
to the amendment of this Declaration of Trust as provided in Article XII,
Section 7; (v) to the same extent as the shareholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should be brought or maintained derivatively or as a class action on behalf of
the Trust or the Shareholders; and (vi) with respect to such additional matters
relating to the Trust as may be required by law, by this Declaration of Trust,
or the By-Laws of the Trust or any regulation of the Trust or the Commission or
any State, or as the Trustees may consider desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. Until Shares of a Series or Class are issued, the
Trustees may exercise all rights of Shareholders of such Series or Class with
respect to matters affecting such Series or Class, and may take any action with
respect to the Trust or such Series or Class required or permitted by law, this
Declaration of Trust or any By-Laws of the Trust to be taken by Shareholders.

SECTION 2. MEETINGS.

A Shareholders meeting shall be held as specified in Section 2 of Article
IV at the principal office of the Trust or such other place as the Trustees may
designate. Special meetings of the Shareholders may be called by the Trustees or
the Chief Executive Officer of the Trust and shall be called by the Trustees
upon the written request of Shareholders owning at least one-tenth of the
outstanding Shares of all Series and Classes entitled to vote. Shareholders
shall be entitled to at least fifteen days' notice of any meeting.

SECTION 3. QUORUM AND REQUIRED VOTE.

Except as otherwise provided by law, to constitute a quorum for the
transaction of any business at any meeting of Shareholders there must be
present, in person or by proxy, holders of more than fifty percent of the total
number of outstanding Shares of all Series and Classes entitled to vote at such
meeting. When any one or more Series or Classes is entitled to vote as a single
Series or Class, more than fifty percent of the shares of each such Series or
Class entitled to vote shall constitute a quorum at a Shareholder's meeting of
that Series or Class. If a quorum shall not be present for the purpose of any
vote that may properly come before the meeting, the Shares present in person or
by proxy and entitled to vote at such meeting on such matter may, by plurality
vote, adjourn the meeting from time to time to such place and time without
further notice than by announcement to be given at the meeting until a quorum
entitled to vote on such matter shall be present, whereupon any such matter may
be voted upon at the meeting as though held when originally convened. Subject to
any applicable requirement of law or of this Declaration of Trust or the
By-Laws, a plurality of the votes cast shall elect a Trustee, and all other
matters shall be decided by a majority of the votes cast and entitled to vote
thereon.

SECTION 4. ADDITIONAL PROVISIONS.

The By-Laws may include further provisions for Shareholders' votes and
meetings and related matters.

ARTICLE IX

CUSTODIAN

SECTION 1. APPOINTMENT AND DUTIES.

The Trustees shall appoint or otherwise engage a bank or trust company
having an aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least two million dollars ($2,000,000) as custodian with
authority as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the By-Laws of the Trust:

(1) To receive and hold the securities owned by the Trust or any Series or
Class and deliver the same upon written order;

(2) To receive and receipt for any moneys due to the Trust or any Series
or Class and deposit the same in its own banking department or
elsewhere as the Trustees may direct; and

(3) To disburse such funds upon orders or vouchers;

(4) To keep the books and accounts of the Trust or any Series or Class and
furnish clerical and accounting services;

(5) To compute, if authorized to do so by the Trustees, the Accumulated
Net Income of the Trust or any Series or Class and the net asset value
of the Shares in accordance with the provisions hereof;

all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust or any Series held by it as
specified in such vote.

The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having an
aggregate capital, surplus and undivided profits (as shown in its last published
report) of at least two million dollars ($2,000,000).

SECTION 2. CENTRAL CERTIFICATE SYSTEM.

Subject to such rules, regulations and orders as the Commission may adopt,
the Trustees may direct the custodian to deposit all or any part of the
securities owned by the Trust or any Series in a system for the central handling
of securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, or such other person as may be permitted by the Commission
or otherwise in accordance with the 1940 Act, pursuant to which system all
securities of any particular class or series of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the custodian at
the direction of the Trustees.

ARTICLE X

DISTRIBUTIONS AND REDEMPTIONS

SECTION 1. DISTRIBUTIONS.

(a) The Trustees may, on each day Accumulated Net Income of any Series or
Class is determined and is positive, declare and pay such Accumulated Net Income
as dividends to the Shareholders of such Series or Class, and the amount of such
dividends and the payment of them shall be wholly in the discretion of the
Trustees. Such dividends may be accrued and automatically reinvested in
additional Shares (or fractions thereof) of the relevant Series or Class or paid
in cash or additional Shares of such Series or Class, all upon such terms and
conditions as the Trustees may prescribe.

(b) The Trustees may distribute in respect of any fiscal year as dividends
and as capital gains distributions, respectively, amounts sufficient to enable
any Series or Class to qualify as a regulated investment company to avoid any
liability for federal income taxes in respect of that year.

(c) The decision of the Trustees as to what constitutes income and what
constitutes principal shall be final, and except as specifically provided herein
the decision of the Trustees as to what expenses and charges of any Series or
Class shall be charged against principal and what against the income shall be
final. Any income not distributed in any year may be permitted to accumulate and
as long as not distributed may be invested from time to time in the same manner
as the principal funds of any Series or Class.

(d) The Trustees shall have power, to the fullest extent permitted by the
laws of Massachusetts, at any time, or from time to time, to declare and cause
to be paid dividends on any Series or Class, which dividends, at the election of
the Trustees, may be accrued, automatically reinvested in additional Shares (or
fractions thereof) of the relevant Series or Class or paid in cash or additional
Shares of the relevant Series or Class, all upon such terms and conditions as
the Trustees may prescribe.

(e) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a dividend consisting of shares
of any Series or Class of the Trust.

(f) All dividends and distributions on Shares of a particular Series or
Class shall be distributed pro rata to the holders of that Series or Class in
proportion to the number of Shares of that Series or Class held by such holders
and recorded on the books of the Trust or its transfer agent at the date and
time of record established for that payment.

SECTION 2. REDEMPTIONS AND REPURCHASES.

(a) In case any Shareholder of record of any Series or Class at any time
desires to dispose of Shares of such Series or Class recorded in his name, he
may deposit a written request (or such other form of request as the Trustees may
from time to time authorize) requesting that the Trust purchase his Shares,
together with such other instruments or authorizations to effect the transfer as
the Trustees may from time to time require, at the office of the Transfer Agent,
and the Trust shall purchase his Shares out of assets belonging to such Series
or Class. The purchase price shall be the net asset value of his shares reduced
by any redemption charge as the Trustees from time to time may determine.

Payment for such Shares shall be made by the Trust to the Shareholder of
record within that time period required under the 1940 Act after the request
(and, if required, such other instruments or authorizations of transfer) is
deposited, subject to the right of the Trustees to postpone the date of payment
pursuant to Section 4 of this Article X. If the redemption is postponed beyond
the date on which it would normally occur by reason of a declaration by the
Trustees suspending the right of redemption pursuant to Section 4 of this
Article X, the right of the Shareholder to have his Shares purchased by the
Trust shall be similarly suspended, and he may withdraw his request (or such
other instruments or authorizations of transfer) from deposit if he so elects;
or, if he does not so elect, the purchase price shall be the net asset value of
his Shares determined next after termination of such suspension (reduced by any
redemption charge), and payment therefor shall be made within the time period
required under the 1940 Act.

(b) The Trust may purchase Shares of a Series or Class by agreement with
the owner thereof at a purchase price not exceeding the net asset value per
Share (reduced by any redemption charge) determined (1) next after the purchase
or contract of purchase is made or (2) at some later time.

(c) The Trust may pay the purchase price (reduced by any redemption charge)
in whole or in part by a distribution in kind of securities from the portfolio
of the relevant Series or Class, taking such securities at the same value
employed in determining net asset value, and selecting the securities in such
manner as the Trustees may deem fair and equitable.

SECTION 3. DETERMINATION OF ACCUMULATED NET INCOME.

The Accumulated Net Income of any Series or Class of the Trust shall be
determined by or on behalf of the Trustees at such time or times as the Trustees
shall in their discretion determine. Such determination shall be made in
accordance with generally accepted accounting principles and practices and may
include realized and/or unrealized gains from the sale or other disposition of
securities or other property of the relevant Series. The power and duty to
determine Accumulated Net Income for any Series or Class may be delegated by the
Trustees from time to time to one or more of the Trustees or officers of the
Trust, to the other party to any contract entered into pursuant to Section 1 or
2 of Article VII, or to the custodian or to a transfer agent.

SECTION 4. NET ASSET VALUE OF SHARES.

The net asset value of each Share of a Series or Class outstanding shall be
determined at such time or times as may be determined by or on behalf of the
Trustees. The power and duty to determine net asset value may be delegated by
the Trustees from time to time to one or more of the Trustees or officers of the
Trust, to the other party to any contract entered into pursuant to Section 1 or
2 of Article VII or to the custodian or to a transfer agent or other person
designated by the Trustees.

The net asset value of each Share of a Series or Class as of any particular
time shall be the quotient (adjusted to the nearer cent) obtained by dividing
the value, as of such time, of the net assets belonging to such Series or Class
(i.e., the value of the assets belonging to such Series or Class less the
liabilities belonging to such Series or Class exclusive of capital and surplus)
by the total number of Shares outstanding of the Series or Class at such time in
accordance with the requirements of the 1940 Act and applicable provisions of
the By-Laws of the Trust in conformity with generally accepted accounting
practices and principles.

The Trustees may declare a suspension of the determination of net asset
value for the whole or any part of any period in accordance with the 1940 Act.

SECTION 5. SUSPENSION OF THE RIGHT OF REDEMPTION.

The Trustees may declare a suspension of the right of redemption or
postpone the date of payment for the whole or any part of any period in
accordance with the 1940 Act.

SECTION 6. TRUST'S RIGHT TO REDEEM SHARES.

The Trust shall have the right to cause the redemption of Shares of any
Series or Class in any Shareholder's account for their then current net asset
value and promptly make payment to the shareholder (which payment may be reduced
by any applicable redemption charge), if at any time the total investment in the
account does not have a minimum dollar value determined from time to time by the
Trustees in their sole discretion. Shares of any Series or Class of the Trust
are redeemable at the option of the Trust if, in the opinion of the Trustees,
ownership of such Shares has or may become concentrated to an extent which would
cause the Trust or any Series to be a personal holding company within the
meaning of the Federal Internal Revenue Code (and thereby disqualified under
Sub-chapter M of said Code); in such circumstances the Trust may compel the
redemption of Shares of such Series or Class, reject any order for the purchase
of such Shares or refuse to give effect to the transfer of such Shares.

ARTICLE XI

LIMITATION OF LIABILITY AND INDEMNIFICATION

SECTION 1. LIMITATION OF PERSONAL LIABILITY AND INDEMNIFICATION OF
SHAREHOLDERS.

The Trustees, officers, employees or agents of the Trust shall have no
power to bind any Shareholder of any Series or Class personally or to call upon
such Shareholder for the payment of any sum of money or assessment whatsoever,
other than such as the Shareholder may at any time agree to pay by way of
subscription to any Shares or otherwise.

No Shareholder or former Shareholder of any Series or Class shall be liable
solely by reason of his being or having been a Shareholder for any debt, claim,
action, demand, suit, proceeding, judgment, decree, liability or obligation of
any kind, against, or with respect to the Trust or any Series or Class arising
out of any action taken or omitted for or on behalf of the Trust or such Series
or Class, and the Trust or such Series or Class shall be solely liable therefor
and resort shall be had solely to the property of the relevant Series or Class
of the Trust for the payment or performance thereof.

Each Shareholder or former Shareholder of any Series or Class (or their
heirs, executors, administrators or other legal representatives or, in case of a
corporate entity, its corporate or general successor) shall be entitled to be
indemnified and reimbursed by the Trust to the full extent of such liability and
the costs of any litigation or other proceedings in which such liability shall
have been determined, including, without limitation, the fees and disbursements
of counsel if, contrary to the provisions hereof, such Shareholder or former
Shareholder of such Series or Class shall be held to be personally liable. Such
indemnification and reimbursement shall come exclusively from the assets of the
relevant Series or Class.

The Trust shall, upon request by a Shareholder or former Shareholder,
assume the defense of any claim made against any Shareholder for any act or
obligation of the Trust or any Series or Class and satisfy any judgment thereon.

SECTION 2. LIMITATION OF PERSONAL LIABILITY OF TRUSTEES, OFFICERS,
EMPLOYEES OR AGENTS OF THE TRUST.

No Trustee, officer, employee or agent of the Trust shall have the power to
bind any other Trustee, officer, employee or agent of the Trust personally. The
Trustees, officers, employees or agents of the Trust incurring any debts,
liabilities or obligations, or in taking or omitting any other actions for or in
connection with the Trust are, and each shall be deemed to be, acting as
Trustee, officer, employee or agent of the Trust and not in his own individual
capacity.

Provided they have acted under the belief that their actions are in the
best interest of the Trust, the Trustee and officers shall not be responsible
for or liable in any event for neglect or wrong doing by them or any officer,
agent, employee, investment adviser or principal underwriter of the Trust or of
any entity providing administrative services for the Trust, but nothing herein
contained shall protect any Trustee or officer against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.

SECTION 3. EXPRESS EXCULPATORY CLAUSES AND INSTRUMENTS.

The Trustees shall use every reasonable means to assure that all persons
having dealings with the Trust or any Series or Class shall be informed that the
property of the Shareholders and the Trustees, officers, employees and agents of
the Trust or any Series or Class shall not be subject to claims against or
obligations of the Trust or any other Series or Class to any extent whatsoever.
The Trustees shall cause to be inserted in any written agreement, undertaking or
obligation made or issued on behalf of the Trust or any Series or Class
(including certificates for Shares of any Series or Class) an appropriate
reference to the provisions of this Declaration, providing that neither the
Shareholders, the Trustees, the officers, the employees nor any agent of the
Trust or any Series or Class shall be liable thereunder, and that the other
parties to such instrument shall look solely to the assets belonging to the
relevant Series or Class for the payment of any claim thereunder or for the
performance thereof; but the omission of such provisions from any such
instrument shall not render any Shareholder, Trustee, officer, employee or agent
liable, nor shall the Trustee, or any officer, agent or employee of the Trust or
any Series or Class be liable to anyone for such omission. If, notwithstanding
this provision, any Shareholder, Trustee, officer, employee or agent shall be
held liable to any other person by reason of the omission of such provision from
any such agreement, undertaking or obligation, the Shareholder, Trustee,
officer, employee or agent shall be indemnified and reimbursed by the Trust.

SECTION 4. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.

(a) Every person who is or has been a Trustee, officer, employee or agent
of the Trust or of any Series of the Trust and persons who serve at the Trust's
request as director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall be indemnified by
the Trust or the relevant Series to fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any debt, claim, action, demand, suit, proceeding, judgment,
decree, liability or obligation of any kind in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee, officer,
employee or agent of the Trust or of such Series or of another corporation,
partnership, joint venture, trust or other enterprise at the request of the
Trust or of such Series and against amounts paid or incurred by him in the
settlement thereof.

(b) The words "claim," "action," "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, administrative,
legislative, investigative or other, including appeals), actual or threatened,
and the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.

(c) No indemnification shall be provided hereunder to a Trustee, officer,
employee or agent against any liability to the Trust or any Series of the Trust
or to its Shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.

(d) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust or any Series, shall be severable, shall not
affect nay other rights to which any Trustee, officer, employee or agent may now
or hereafter be entitled, shall continue as to a person who has ceased to be
such Trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.

(e) In the absence of a final decision on the merits by a court or other
body before which such proceeding was brought, an indemnification payment will
not be made, except as provided in paragraph (f) of this Section 4, unless in
the absence of such a decision, a reasonable determination based upon a factual
review has been made (i) by a majority vote of a quorum of non-party trustees
who are not interested persons of the Trust, or (ii) by independent legal
counsel in a written opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
duties.

(f) The Trust and each Series further undertakes that advancement of
expenses incurred in the defense of a proceeding (upon undertaking for repayment
unless it is ultimately determined that indemnification is appropriate) against
an officer, trustee or controlling person of the Trust or any Series of the
Trust will not be made absent the fulfillment of at least one of the following
conditions: (i) the indemnitee provides security for his undertaking, (ii) the
Trust or Series is insured against losses arising by reason of any lawful
advances or (iii) a majority of a quorum of disinterested non-party trustees or
independent legal counsel in a written opinion makes a factual determination
that there is a reason to believe the indemnitee will be entitled to
indemnification.

ARTICLE XII

MISCELLANEOUS

SECTION 1. TRUST IS NOT A PARTNERSHIP.

It is hereby expressly declared that a trust and not a partnership is
created hereby.

SECTION 2. TRUSTEE ACTION BINDING, EXPERT ADVICE, NO BOND OR SURETY.

The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to the provisions of Article
XI, the Trustees shall not be liable for errors of judgment or mistakes of fact
or law. The Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust, and subject to the
provisions of Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
required.

SECTION 3. ESTABLISHMENT OF RECORD DATES.

The Trustees may close the Share transfer books of the Trust maintained
with respect to any Series or Class for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders of the Trust or any Series or
Class, or the date for the payment of any dividend or the making of any
distribution to Shareholders, or the date for the allotment of rights, or the
date when any change or conversion or exchange of Shares of any Series or Class
shall go into effect; or in lieu of closing the Share transfer books as
aforesaid, the Trustees may fix in advance a date, not exceeding sixty (60) days
preceding the date of any meeting of Shareholders of the Trust or any Series or
Class, or the date for the payment of any dividend or the making of any
distribution to Shareholders of any Series or Class, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares of any Series or Class shall go into effect, or the last day on which the
consent or dissent of Shareholders of any Series or Class may be effectively
expressed for any purpose, as a record date for the determination of the
Shareholders entitled to notice of, and, to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend or
distribution, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of shares, or to exercise the
right to give such consent or dissent, and in such case such Shareholders and
only such Shareholders as shall be Shareholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting, or to receive
payment of such dividend or distribution, or to receive such allotment or
rights, or to exercise such rights, as the case may be, notwithstanding, after
such date fixed aforesaid, any transfer of any Shares on the books of the Trust
maintained with respect to any Series or Class. Nothing in the foregoing
sentence shall be construed as precluding the Trustees from setting different
record dates for different Series or Classes.

SECTION 4. TERMINATION OF TRUST.

(a) This Trust shall continue without limitation of time but subject to the
provisions of paragraphs (b), (c) and (d) of this Section 4.

(b) The Trustees may, by majority action, with the approval of the holders
of more than fifty percent of the outstanding Shares of each Series or Class
entitled to vote and voting separately by Series or Class, sell and convey the
assets of the Trust or any Series or Class to another trust or corporation. Upon
making provision for the payment of all liabilities, by assumption or otherwise,
the Trustees shall distribute the remaining proceeds belonging to each Series or
Class ratably among the holders of the Shares of that Series or Class then
outstanding.

(c) Subject to a Majority Shareholder Vote by such Series or Class, the
Trustees may at any time sell and convert into money all the assets of the Trust
or any Series or Class. Upon making provision for the payment of all outstanding
obligations, taxes and other liabilities, accrued or contingent, belonging to
each Series or Class, the Trustees shall distribute the remaining assets
belonging to each Series or Class ratably among the holders of the outstanding
Shares of that Series or Class.

(d) Upon completion of the distribution of the remaining proceeds of the
remaining assets as provided in paragraphs (b) and (c), the Trust or the
applicable Series or Class shall terminate and the Trustees shall be discharged
of any and all further liabilities and duties hereunder or with respect thereto
and the right, title and interest of all parties shall be canceled and
discharged.

SECTION 5. OFFICES OF THE TRUST, FILING OF COPIES, HEADINGS, COUNTERPARTS.

The Trust shall maintain a usual place of business in Massachusetts, which,
initially, shall be 50 Congress Street, SEE AMD. #4, DATED 7/5/94, Boston,
Massachusetts, and shall continue to maintain an office at such address unless
changed by the Trustees to another location in Massachusetts. The Trust may
maintain other offices as the Trustees may from time to time determine. The
original or a copy of this instrument and of each Declaration of Trust
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each supplemental
declaration of trust shall be filed by the Trustees with the Massachusetts
Secretary of State and the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required. Headings are placed
herein for convenience of reference only and in case of any conflict, the text
of this instrument, rather than the headings shall control. This instrument may
be executed in any number of counterparts each of which shall be deemed an
original.

SECTION 6. APPLICABLE LAW.

The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of The
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.

SECTION 7. AMENDMENTS -- GENERAL.

Prior to the initial issuance of Shares pursuant to Section 3 of Article
III, a majority of the Trustees then in office may amend or otherwise supplement
this instrument by making a Declaration of Trust supplemental hereto, which
thereafter shall form a part hereof. Subsequent to such initial issuance of
Shares, amendments or supplements to this instrument may be authorized by a
majority of the Trustees then in office and by a Majority Shareholder Vote of
all Series and Classes then outstanding and entitled to vote thereon (except
that any amendments or supplements changing the name of the Trust or pursuant to
Section 8 hereunder may be made without shareholder approval), or by any larger
vote which may be required by applicable law or this Declaration of Trust in any
particular case, which amendment or supplement thereafter shall form a part
hereof. Any such amendment or supplement (which may be in the form of a complete
restatement) may be evidenced by either (i) a supplemental Declaration of Trust
signed by at least a majority of the Trustees then in office or (ii)Eby a
certificate of the President and Secretary of the Trust setting forth such
amendment or supplement and certifying that such amendment or supplement has
been duly authorized by the Trustees, and if required, by the shareholders.
Copies of the supplemental Declaration of Trust or the certificate of the
President and Secretary, as the case may be, shall be filed as specified in
Section 5 of this Article XII.

SECTION 8. AMENDMENTS -- SERIES.

The establishment and designation of any series or class of Shares in
addition to those established and designated in Section 5 of Article III hereof
shall be effective upon the execution by a majority of the then Trustees of an
amendment to this Declaration of Trust, taking the form of a complete
restatement or otherwise, setting forth such establishment and designation and
the relative rights and preferences of any such Series or Class, or as otherwise
provided in such instrument.

Without limiting the generality of the foregoing, the Declaration of the
Trust may be amended to:

(a) create one or more Series or Classes of Shares (in addition to any
Series or Classes already existing or otherwise) with such rights and
preferences and such eligibility requirements for investment therein as the
Trustees shall determine and reclassify any or all outstanding Shares as Shares
of particular Series or Classes in accordance with such eligibility
requirements;

(b) combine two or more Series or Classes of Shares into a single Series
or Class on such terms and conditions as the Trustees shall determine;

(c) change or eliminate any eligibility requirements for investment in
Shares of any Series or Class, including without limitation the power to provide
for the issue of Shares of any Series or Class in connection with any merger or
consolidation of the Trust with another trust or company or any acquisition by
the Trust of part or all of the assets of another trust or company;

(d) change the designation of any Series or Class of Shares;

(e) change the method of allocating dividends among the various Series and
Classes of Shares;

(f) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series and
Classes of Shares;

(g) specifically allocate assets to any or all Series or Classes of Shares
or create one or more additional Series or Classes of Shares which are preferred
over all other Series or Classes of Shares in respect of assets specifically
allocated thereto or any dividends paid by the Trust with respect to any net
income, however determined, earned from the investment and reinvestment of any
assets so allocated or otherwise and provide for any special voting or other
rights with respect to such Series or Classes.

IN WITNESS WHEREOF, the undersigned have executed this instrument the day
and year first above written.

/S/JOHN F. DONAHUE /S/EDWARD L. FLAHERTY, JR.
John F. Donahue Edward L. Flaherty, Jr.

/S/JOHN T. CONROY, JR. /S/PETER E. MADDEN
John T. Conroy, Jr. Peter E. Madden

/S/WILLIAM J. COPELAND /S/GREGOR F. MEYER
William J. Copeland Gregor F. Meyer

/S/JAMES E. DOWD /S/WESLEY W. POSVAR
James E. Dowd Wesley W. Posvar

/S/LAWRENCE D. ELLIS, M.D. /S/MARJORIE P. SMUTS
Lawrence D. Ellis, M.D. Marjorie P. Smuts

/S/JOHN A. STALEY, IV
John A. Staley, IV

<PAGE>

COMMONWEALTH OF PENNSYLVANIA )
) ss:

COUNTY OF ALLEGHENY )

I hereby certify that on December 31, 1991, before me, the subscriber, a
Notary Public of the Commonwealth of Pennsylvania, in the County of Allegheny,
personally appeared JOHNEF. DONAHUE, JOHN T. CONROY, JR., WILLIAMEJ. COPELAND,
JAMES E. DOWD, LAWRENCEED. ELLIS, M.D., EDWARDEL. FLAHERTY, JR., GREGOR F.
MEYER, PETER E. MADDEN, WESLEY W. POSVAR, MARJORIE P. SMUTS, AND JOHN A. STALEY,
IV., who acknowledged the foregoing Declaration of Trust to be their act.

Witness my hand and notarial seal the day and year above written.

/S/CYNTHIA L. GORSETH
Notary Public

<PAGE>

Exhibit 3(i) (ii) under Form N-1A
Exhibit (a) under Item 601/Reg. S-K

December 15, 1993

Ms. Sheila Burke
The Commonwealth of Massachusetts
Office of the Secretary of State
Room 1712 - Trust Division
One Ashburton Place
Boston, Massachusetts 02108

Re: FEDERATED INCOME SECURITIES TRUST

Dear Ms. Burke:

I, S. Elliott Cohan, Assistant Secretary of Federated Income Securities Trust,
am writing to inform you that on November 18, 1993, the Board of Trustees voted
to change the Resident Agent of said Trust, from 176 Federal Street, Boston,
Massachusetts 02110 to Donnelly, Conroy & Gelhaar, One Post Office Square,
Boston, Massachusetts 02109-2105. Please return a date stamped copy of the
change.

Very truly yours,

/s/ S. Elliott Cohan
S. Elliott Cohan
Assistant Secretary

Exhibit (d)(i) under Form N-1A
Exhibit (10) under Item 601/Reg. S-K

FEDERATED INCOME SECURITIES TRUST

INVESTMENT ADVISORY CONTRACT

This Contract is made this 31st day of December, 1991, between FEDERATED
MANAGEMENT, a Delaware business trust having its principal place of business in
Pittsburgh, Pennsylvania (the "Adviser"), and FEDERATED INCOME SECURITIES TRUST,
a Massachusetts business trust having its principal place of business in
Pittsburgh, Pennsylvania (the "Trust").

WHEREAS the Trust is an open-end management investment company as that term
is defined in the Investment Company Act of 1940 and is registered as such
with the Securities and Exchange Commission; and

WHEREAS Adviser is engaged in the business of rendering investment advisory
and management services.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:

1. The Trust hereby appoints Adviser as Investment Adviser for each of the
portfolios ("Funds") of the Trust which executes an exhibit to this Contract,
and Adviser accepts the appointments. Subject to the direction of the Trustees
of the Trust, Adviser shall provide investment research and supervision of the
investments of the Funds and conduct a continuous program of investment
evaluation and of appropriate sale or other disposition and reinvestment of each
Fund's assets.

2. Adviser, in its supervision of the investments of each of the Funds will
be guided by each of the Fund's investment objective and policies and the
provisions and restrictions contained in the Declaration of Trust and By-Laws of
the Trust and as set forth in the Registration Statements and exhibits as may be
on file with the Securities and Exchange Commission.

3. Each Fund shall pay or cause to be paid all of its own expenses and its
allocable share of Trust expenses, including, without limitation, the expenses
of organizing the Trust and continuing its existence; fees and expenses of
Trustees and officers of the Trust; fees for investment advisory services and
administrative personnel and services; fees and expenses of preparing and
printing its Registration Statements under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto; expenses of
registering and qualifying the Trust, the Funds, and shares ("Shares") of the
Funds under federal and state laws and regulations; expenses of preparing,
printing, and distributing prospectuses (and any amendments thereto) to
shareholders; interest expense, taxes, fees, and commissions of every kind;
expenses of issue (including cost of Share certificates), purchase, repurchase,
and redemption of Shares, including expenses attributable to a program of
periodic issue; charges and expenses of custodians, transfer agents, dividend
disbursing agents, shareholder servicing agents, and registrars; printing and
mailing costs, auditing, accounting, and legal expenses; reports to shareholders
and governmental officers and commissions; expenses of meetings of Trustees and
shareholders and proxy solicitations therefor; insurance expenses; association
membership dues and such nonrecurring items as may arise, including all losses
and liabilities incurred in administering the Trust and the Funds. Each Fund
will also pay its allocable share of such extraordinary expenses as may arise
including expenses incurred in connection with litigation, proceedings, and
claims and the legal obligations of the Trust to indemnify its officers and
Trustees and agents with respect thereto.

4. Each of the Funds shall pay to Adviser, for all services rendered to
each Fund by Adviser hereunder, the fees set forth in the exhibits attached
hereto.

5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest cent.

6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of one
or more of the Funds or classes thereof) to the extent the expenses of any Fund
or a class of shares thereof exceed such lower expense limitation as the Adviser
may, by notice to the Fund, voluntarily declare to be effective.

7. This contract shall begin for each Fund as of the date of execution of
the applicable exhibit and shall continue in effect with respect to each Fund
presently set forth on an exhibit (and any subsequent Funds added pursuant to an
exhibit during the initial term of this contract) for two years from the date of
this contract set forth above and thereafter for successive periods of one year,
subject to the provisions for termination and all of the other terms and
conditions hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust, including
a majority of the Trustees who are not parties to this Contract or interested
persons of any such party (other than as Trustees of the Trust), cast in person
at a meeting called for that purpose; and (b) Adviser shall not have notified a
Fund in writing at least sixty (60) days prior to the anniversary date of this
Contract in any year thereafter that it does not desire such continuation with
respect to that Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as to that Fund
upon execution of the applicable exhibit and will continue in effect until the
next annual approval of this Contract by the Trustees and thereafter for
successive periods of one year, subject to approval as described above.

8. Notwithstanding any provision in this Contract, it may be terminated at
any time with respect to any Fund, without the payment of any penalty, by the
Trustees of the Trust or by a vote of the shareholders of that Fund on sixty
(60) days' written notice to Adviser.

9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser may employ or contract with
such other person, persons, corporation, or corporations at its own cost and
expense as it shall determine in order to assist it in carrying out this
Contract.

10. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties under this Contract on the part
of Adviser, Adviser shall not be liable to the Trust or to any of the Funds or
to any shareholder for any act or omission in the course of or connected in any
way with rendering services or for any losses that may be sustained in the
purchase, holding, or sale of any security.

11. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved both by the vote of a majority of
the Trustees of the Trust, including a majority of the Trustees who are not
parties to this Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust) cast in person at a meeting
called for that purpose, and on behalf of a Fund by a majority of the
outstanding voting securities of such Fund.

12. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of the Trust
and agrees that the obligations pursuant to this Contract of a particular Fund
and of the Trust with respect to that particular Fund be limited solely to the
assets of that particular Fund, and Adviser shall not seek satisfaction of any
such obligation from any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Trust, or any of them.

13. Each Fund is hereby expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of the Adviser and agrees
that the obligations assumed by the Adviser pursuant to this Contract shall be
limited in any case to the Adviser and its assets and, except to the extent
expressly permitted by the Investment Company Act of 1940, no Fund shall seek
satisfaction of any such obligation from the shareholders of the Adviser, the
Trustees, officers, employees or agents of the Adviser, or any of them.

14. The parties hereto acknowledge that the Adviser's parent, Federated
Investors, has reserved the right to grant the non-exclusive use of the name
"Federated" or any derivative thereof to any other investment company,
investment adviser, distributor or other business enterprise, and to withdraw
from the Fund the use of the name "Federated". The name "Federated" will
continue to be used by the Fund so long as such use is mutually agreeable to
Federated Investors and the Fund.

15. This Contract shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.

16. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.

<PAGE>

Exhibit (d)(ii) under Form N-1A
Exhibit (10) under Item 601/Reg. S-K

EXHIBIT B

to the

Investment Advisory Contract

INTERMEDIATE INCOME FUND

For all services rendered by the Adviser hereunder, the above-named Fund of
the Trust shall pay to the Adviser and the Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment advisory
fee equal to 0.50 of 1% of the average daily net assets of the Fund.

The portion of the fees based upon the average daily net assets of the Fund
shall be accrued daily at the rate of 1/365th of 0.50 of 1% applied to the daily
net assets of the Fund.

The advisory fee so accrued shall be paid to the Adviser daily.

Witness the due execution hereof this 1st day of December, 1993.

Attest: FEDERATED MANAGEMENT

/S/ JOHN W. MCGONIGLE By: /S/ WILLIAM D. DAWSON
Secretary Vice President

Attest: FEDERATED INCOME SECURITIES TRUST

/S/ VICTOR R. SICLARI By: /S/ J. CHRISTOPHER DONAHUE
Assistant Secretary Vice President

Exhibit (e)(i) under Form N1-A
Exhibit (1) under Item 601/Reg. S-K

FEDERATED INCOME SECURITIES TRUST

DISTRIBUTOR'S CONTRACT

AGREEMENT made this 31st day of December, 1991, by and between FEDERATED
INCOME SECURITIES TRUST, (the "Trust"), a Massachusetts business trust, and
FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania Corporation.

In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:

1. The Trust hereby appoints FSC as its agent to sell and distribute shares
of the Trust which may be offered in one or more series (the "Funds") consisting
of one or more classes (the "Classes") of shares (the "Shares") as described and
set forth on one or more exhibits to this Agreement at the current offering
price thereof as described and set forth in the current Prospectuses of the
Trust. FSC hereby accepts such appointment and agrees to provide such other
services for the Trust, if any, and accept such compensation from the Trust, if
any, as set forth in the applicable exhibit to this Agreement.

2. The sale of any Shares may be suspended without prior notice whenever in
the judgment of the Trust it is in its best interest to do so.

3. Neither FSC nor any other person is authorized by the Trust to give any
information or to make any representation relative to any Shares other than
those contained in the Registration Statement, Prospectuses, or Statements of
Additional Information ("SAIs") filed with the Securities and Exchange
Commission, as the same may be amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the Trust. FSC agrees that
any other information or representations other than those specified above which
it or any dealer or other person who purchases Shares through FSC may make in
connection with the offer or sale of Shares, shall be made entirely without
liability on the part of the Trust. No person or dealer, other than FSC, is
authorized to act as agent for the Trust for any purpose. FSC agrees that in
offering or selling Shares as agent of the Trust, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and regulations
of the National Association of Securities Dealers, Inc., including its Rules of
Fair Practice. FSC will submit to the Trust copies of all sales literature
before using the same and will not use such sales literature if disapproved by
the Trust.

4. This Agreement is effective with respect to each Class as of the date of
execution of the applicable exhibit and shall continue in effect with respect to
each Class presently set forth on an exhibit and any subsequent Classes added
pursuant to an exhibit during the initial term of this Agreement for one year
from the date set forth above, and thereafter for successive periods of one year
if such continuance is approved at least annually by the Trustees of the Trust
including a majority of the members of the Board of Trustees of the Trust who
are not interested persons of the Trust and have no direct or indirect financial
interest in the operation of any Distribution Plan relating to the Trust or in
any related documents to such Plan ("Disinterested Trustees") cast in person at
a meeting called for that purpose. If a Class is added after the first annual
approval by the Trustees as described above, this Agreement will be effective as
to that Class upon execution of the applicable exhibit and will continue in
effect until the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as described
above.

5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a majority
of the Disinterested Trustees or by a majority of the outstanding voting
securities of the particular Fund or Class on not more than sixty (60) days'
written notice to any other party to this Agreement. This Agreement may be
terminated with regard to a particular Fund or Class by FSC on sixty (60) days'
written notice to the Trust.

6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the Investment
Company Act of 1940, provided, however, that FSC may employ such other person,
persons, corporation or corporations as it shall determine in order to assist it
in carrying out its duties under this Agreement.

7. FSC shall not be liable to the Trust 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 by this Agreement.

8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved by
the Trustees of the Trust including a majority of the Disinterested Trustees of
the Trust cast in person at a meeting called for that purpose.

9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.

10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless FSC and each person, if any, who controls FSC within
the meaning of Section 15 of the Securities Act of 1933 and Section 20 of the
Securities Exchange Act of 1934, as amended, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or threatened, or any claim
whatsoever) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectuses or SAI's (as from time to time amended and supplemented) or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Trust about FSC by or on behalf of FSC expressly
for use in the Registration Statement, any Prospectuses and SAIs or any
amendment or supplement thereof.

If any action is brought against FSC or any controlling person thereof with
respect to which indemnity may be sought against the Trust pursuant to the
foregoing paragraph, FSC shall promptly notify the Trust in writing of the
institution of such action and the Trust shall assume the defense of such
action, including the employment of counsel selected by the Trust and payment of
expenses. FSC or any such controlling person thereof shall have the right to
employ separate counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of FSC or such controlling person unless the
employment of such counsel shall have been authorized in writing by the Trust in
connection with the defense of such action or the Trust shall not have employed
counsel to have charge of the defense of such action, in any of which events
such fees and expenses shall be borne by the Trust. Anything in this paragraph
to the contrary notwithstanding, the Trust shall not be liable for any
settlement of any such claim of action effected without its written consent. The
Trust agrees promptly to notify FSC of the commencement of any litigation or
proceedings against the Trust or any of its officers or Trustees or controlling
persons in connection with the issue and sale of Shares or in connection with
the Registration Statement, Prospectuses, or SAI's.

(b) FSC agrees to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the Registration Statement and
each other person, if any, who controls the Trust within the meaning of Section
15 of the Securities Act of 1933, but only with respect to statements or
omissions, if any, made in the Registration Statement or any Prospectus, SAI, or
any amendment or supplement thereof in reliance upon, and in conformity with,
information furnished to the Trust about FSC by or on behalf of FSC expressly
for use in the Registration Statement or any Prospectus, SAI, or any amendment
or supplement thereof. In case any action shall be brought against the Trust or
any other person so indemnified based on the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof, and with respect to
which indemnity may be sought against FSC, FSC shall have the rights and duties
given to the Trust, and the Trust and each other person so indemnified shall
have the rights and duties given to FSC by the provisions of subsection (a)
above.

(c) Nothing herein contained shall be deemed to protect any person against
liability to the Trust or its shareholders to which such person would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of the duties of such person or by reason of the reckless
disregard by such person of the obligations and duties of such person under this
Agreement.

(d) Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for Trustees, officers, FSC and
controlling persons of the Trust by the Trust pursuant to this Agreement, the
Trust is aware of the position of the Securities and Exchange Commission as set
forth in the Investment Company Act Release No. IC-11330. Therefore, the Trust
undertakes that in addition to complying with the applicable provisions of this
Agreement, in the absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a majority vote of
a quorum of non-party Disinterested Trustees, or (ii) by independent legal
counsel in a written opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence or reckless disregard of
duties. The Trust further undertakes that advancement of expenses incurred in
the defense of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate) against an officer,
Trustee, FSC or controlling person of the Trust will not be made absent the
fulfillment of at least one of the following conditions: (i) the indemnitee
provides security for his undertaking; (ii) the Trust is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a quorum of
non-party Disinterested Trustees or independent legal counsel in a written
opinion makes a factual determination that there is reason to believe the
indemnitee will be entitled to indemnification.

11. FSC is hereby expressly put on notice of the limitation of liability as
set forth in Article XI of the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this agreement shall be limited in
any case to the Trust and its assets and FSC shall not seek satisfaction of any
such obligation from the shareholders of the Trust, the Trustees, officers,
employees or agents of the Trust, or any of them.

12. FSC agrees to adopt compliance standards as to when a class of shares
may be sold to particular investors.

13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.

<PAGE>

Exhibit (e)(ii) under Form N-1A
Exhibit (1) under Item 601/Reg. S-K

Exhibit A

FEDERATED INCOME SECURITIES TRUST

Federated Short-Term Income Fund

Institutional Shares

In consideration of the mutual covenants set forth in the Distributor's
Contract dated December 31, 1991 between Federated Income Securities Trust and
Federated Securities Corp., Federated Income Securities Trust executes and
delivers this Exhibit on behalf of the Funds, and with respect to the separate
Classes of Shares thereof, first set forth in this Exhibit.

Witness the due execution hereof this 31st day of December, 1991.

ATTEST: FEDERATED INCOME SECURITIES TRUST

/S/ JOHN W. MCGONIGLE By:/S/ RICHARD B. FISHER
Secretary President

(SEAL)

ATTEST: FEDERATED SECURITIES CORP.
/S/ S. ELLIOTT COHAN By:/S/ RICHARD B. FISHER
Secretary President

(SEAL)

<PAGE>

Exhibit (e)(iii) under Form N-1A
Exhibit (1) under Item 601/Reg. S-K

Exhibit B

FEDERATED INCOME SECURITIES TRUST

Federated Short-Term Income Fund

Institutional Service Shares

The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 31st day of December, 1991, between Federated
Income Securities Trust and Federated Securities Corp. with respect to the
separate Classes of Shares thereof, first set forth in this Exhibit.

1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the Classes. Pursuant to this
appointment FSC is authorized to select a group of brokers ("Brokers") to sell
shares of the above-listed Classes ("Shares"), at the current offering price
thereof as described and set forth in the respective prospectuses of the Trust,
and to render administrative support services to the Trust and its shareholders.
In addition, FSC is authorized to select a group of Administrators
("Administrators") to render administrative support services to the Trust and
its shareholders.

2. Administrative support services may include, but are not limited to, the
following eleven functions: (1) account openings: the Broker or Administrator
communicates account openings via computer terminals located on the Broker or
Administrator's premises; 2) account closings: the Broker or Administrator
communicates account closings via computer terminals; 3) enter purchase
transactions: purchase transactions are entered through the Broker or
Administrator's own personal computer or through the use of a toll-free
telephone number; 4) enter redemption transactions: Broker or Administrator
enters redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide accounting
support for all transactions. Broker or Administrator also wires funds and
receives funds for Trust share purchases and redemptions, confirms and
reconciles all transactions, reviews the activity in the Trust's accounts, and
provides training and supervision of its personnel; 6) interest posting: Broker
or Administrator posts and reinvests dividends to the Trust's accounts; 7)
prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send to
customers and develops methods of making such materials accessible to customers;
and 11) consultation services: the Broker or Administrator continuously provides
information about the product needs of customers.

3. During the term of this Agreement, the Trust will pay FSC for services
pursuant to this Agreement, a monthly fee computed at the annual rate of .25% of
the average aggregate net asset value of the Institutional Service Shares of
Federated Short-Term Income Fund held during the month. For the month in which
this Agreement becomes effective or terminates, there shall be an appropriate
proration of any fee payable on the basis of the number of days that the
Agreement is in effect during the month.

4. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class expenses exceed such lower
expense limitation as FSC may, by notice to the Trust, voluntarily declare to be
effective.

5. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in its
sole discretion, may pay Brokers and Administrators a periodic fee in respect of
Shares owned from time to time by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid shall be determined
from time to time by FSC in its sole discretion.

6. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts paid to
Brokers and Administrators and the purpose for such payments.

Witness the due execution hereof this 24th day of January, 1992

ATTEST: FEDERATED INCOME SECURITIES TRUST
/S/ JOHN W. MCGONIGLE By:/S/ J. CHRISTOPER DONAHUE
Secretary Vice President

(SEAL)

ATTEST: FEDERATED SECURITIES CORP.
/S/ S. ELLIOTT COHAN By:/S/ RICHARD B. FISHER
Secretary President

(SEAL)

<PAGE>