INVESTMENT SERIES FUNDS INC, 485APOS, 1999-10-29

INVESTMENT SERIES FUNDS INC
485APOS, 1999-10-29

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1933 Act File No. 33-48847
1940 Act File No. 811-07021

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
----------

Pre-Effective Amendment No. ............
---------------------- ----------

Post-Effective Amendment No. 18 ............ X
--------------------- ----------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
----------

Amendment No. 19 ................................ X
--------- ----------------------

INVESTMENT SERIES FUNDS, INC.

(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)

John W. McGonigle, Esquire,
Federated Investors Tower
1001 Liberty Avenue
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)
on _ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
X on December 31, 1999 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 BOND FUND

A Portfolio of Investment Series Funds, Inc.

(Effective on or about February 1, 2000, Investment Series Funds, Inc. will be
named Federated Investment Series Funds, Inc.)

class a shares

class b shares

class c shares

A mutual fund seeking to provide as high a level of current income as is
consistent with the preservation of capital by investing primarily in a
professionally managed, diversified portfolio of fixed income securities.

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

Contents Risk/Return
Summary What are the Fund's
Fees and Expenses?
What are the Fund's
Investment Strategies? What
are the Principal
Securities in Which the
Fund Invests? What are the
Specific Risks of Investing
in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Fund?
Financial Information

december 31, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital. 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 at least 65% of its assets in a diversified portfolio of
investment grade fixed income securities consisting primarily of corporate debt
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. The Fund may invest
up to 35% of its assets in fixed income securities rated below investment grade.

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:

o Interest Rate Risk. Prices of fixed income securities generally fall when
interest rates rise.

o 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.

o Liquidity Risks. The fixed income securities in which the Fund invests may
be less readily marketable and may be subject to greater fluctuation in
price than other securities.

o Risks Associated with Non-Investment Grade Securities. The Fund may invest
a portion of its assets in securities rated below investment grade which
may be subject to greater interest rate, credit and liquidity risks than
investment grade securities.

o Risks of Foreign Investing. Because the Fund invests in securities issued
by foreign companies, the Fund's share price may be more affected by
foreign economic and political conditions, taxation policies and accounting
and auditing standards than would otherwise be the case.

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.

<PAGE>

Risk/Return Bar Chart and Table
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class B Shares of Federated Bond Fund as of the calendar
year-end for each of three years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 2.00% up to 12.00%.

The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's start of business through the calendar year
ended December 31, 1998. The light gray shaded chart features three 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 Class B Shares of the Fund for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1996 through 1998. The percentages noted are: 4.60%, 10.09% and
4.72%.

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

The total returns displayed for the Fund's Class B Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.

The Fund's Class B Shares total return for the nine-month period from January 1,
1999 to September 30, 1999 was (2.92%).

Within the period shown in the Chart, the Fund's Class B Shares highest
quarterly return was 4.18% (quarter ended June 30, 1997). Its lowest quarterly
return was (1.91%) (quarter ended March 31, 1996).

Average Annual Total Return Table
The following table represents the Fund's Class A, Class B and Class C Shares
Average Annual Total Returns, reduced to reflect applicable sales charges, for
the calendar periods ended December 31, 1998. The table shows the Fund's Class
A, Class B and Class C Shares total returns averaged over a period of years
relative to the Lehman Brothers Corporate Bond Index (LBCBI), which is a
broad-based market index, and the Lipper Corporate Debt Funds BBB Rated Average
(LCDBBB), an average of funds with similar investment objectives. The LBCBI is
comprised of a large universe of bonds issued by industrial, utility and
financial companies which have a minimum rating of Baa by Moody's Investors
Service, Inc., BBB by Standard and Poor's or, in the case of bank bonds not
rated by either of the previously mentioned services, BBB by Fitch IBCA, Inc.
Total returns for the indexes 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 Class A Class B Class C LBCBI LCDBBB
1 Year 0.81% (0.70%) 3.75%
[Start of 6.92% 6.79% 7.51%
</TABLE>

Performance1]
[1 The Fund's Class A, Class B and Class C Shares start of performance date was
June 28, 1995. 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 returns.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

federated bond fund

Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Class A, Class B or Class C Shares of the Fund.

Shareholder Fees Class A Class B Class C
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering 4.50% None None
price)
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase 0.00% 5.50% 1.00%
price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other None None None
Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None

Annual Fund Operating Expenses (Before Waivers)(1) Expenses That are Deducted
From Fund Assets (as a percentage of average net assets) Management Fee(2) 0.75%
0.75% 0.75% Distribution (12b-1) Fee(3) 0.25% 0.75% 0.75% Shareholder Services
Fee(4) 0.25% 0.25% 0.25% Other Expenses 0.20% 0.20% 0.20% Total Annual Fund
Operating Expenses 1.45% 1.95%(5) 1.95% 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 actually paid for the fiscal year ended October 31, 1999.
Total Waivers of Fund Expenses 0.40% 0.10% 0.10%
Total Actual Annual Fund Operating Expenses (after waivers) 1.05% 1.85% 1.85%
2 The adviser has 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 Class A, Class B and Class C Shares (after the voluntary
waiver) was 0.65% for the year ended October 31, 1999.
3 Class A Shares did not pay or accrue the distribution (12b-1) fee during the
year ended October 31, 1999. Class A Shares has no present intention of
paying or accruing the distribution (12b-1) fee during the fiscal year ending
October 31, 2000.
4 The shareholder services fee for Class A Shares has voluntarily been reduced.
This voluntary reduction can be terminated at any time. The shareholder
services fee paid by Class A Shares (after the voluntary reduction) was 0.20%
for the year ended October 31, 1999.
5 Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
</TABLE>

<PAGE>

Example

This Example is intended to help you compare the cost of investing in the Fund's
Class A, B, and C Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the Fund's Class A, B, and C Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that the Fund's Class
A, B, and C 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:

Share Class 1 Year 3 Years 5 Years 10 Years
Class A
Expenses assuming redemption $591 $888 $1,207 $2,107
Expenses assuming no redemption $591 $888 $1,207 $2,107
Class B
Expenses assuming redemption $748 $1,012 $1,252 $2,512
Expenses assuming no redemption $198 $612 $1,052 $2,512
Class C
Expenses assuming redemption $296 $612 $1,052 $2,275
Expenses assuming no redemption $198 $612 $1,052 $2,275

</TABLE>

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

Under normal market conditions, the Fund invests at least 65% of the value of
its total assets in a diversified portfolio of domestic investment grade debt
securities, including corporate debt securities and U.S. government obligations.
Investment grade debt 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 principally
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 credit risk (in the case of corporate securities) in order to
complete the analysis. Corporate debt securities generally offer higher yields
than U.S. government securities to compensate for credit risk. The Adviser
invests the Fund's portfolio, seeking the higher relative returns of corporate
debt securities, when available, while attempting to limit the associated credit
risks. The Adviser attempts to manage the Fund's credit risk by selecting
corporate debt securities that are less likely to default in the payment of
principal and interest. The Adviser looks at a variety of factors, including
macroeconomic analysis and corporate earnings analysis, among others, 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
general financial condition to assess whether the security's credit risk is
commensurate with its potential return. The Fund may invest up to 35% of its
portfolio in non-investment grade fixed income securities, which are rated BB or
lower by an NRSRO. The non-investment grade securities in which the Fund invests
generally pay higher interest rates as compensation for the greater default risk
attached to the securities. The Fund may invest in non-investment grade
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. The Adviser may invest a portion
of the Fund's assets in corporate debt securities of companies based outside the
United States, to diversify the Fund's holdings and to gain exposure to the
foreign market. Securities of foreign companies may be more affected by foreign
economic and political conditions, taxation policies and accounting and auditing
standards than those of United States companies. The Adviser may lengthen or
shorten duration from time-to-time based on its interest rate outlook. Duration
measures the price sensitivity of a fixed income security to changes in interest
rates. 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 by analyzing a variety of factors, such as: o
.........current and expected U.S. growth; o current and expected interest rates
and inflation; o the U.S. Federal Reserve Board's monetary policy; and o 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
relative risks and 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 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 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.
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.
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: o it is
organized under the laws of, or has a principal office located in, another
country; o the principal trading market for its securities is in another
country; or o 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.
Substantially all of the Fund's foreign securities are denominated in U.S.
dollars.

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 and high yield 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 Ratings
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.

Securities rated BBB by Standard and Poor's or Baa by Moody's Investors
Services, Inc., also known as junk bonds or high yield bonds, have speculative
characteristics.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

Interest Rate Risks
o 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.
o 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
o 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.
o 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.
o 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.
o 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.
Liquidity Risks
o 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.
Risks Associated with Noninvestment Grade Securities
o Securities rated below investment grade, also known as junk bonds,
generally entail greater market, credit and liquidity risks than investment
grade securities. For example, their prices are more volatile, economic
downturns and financial setbacks may affect their prices more negatively,
and their trading market may be more limited.

Risks of Foreign Investing
o 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.
o 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.
o 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.

WHAT DO SHARES COST?

You can purchase, redeem, or exchange 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) plus any applicable front-end sales charge (public offering
price). From time to time the Fund may purchase foreign securities that trade in
foreign markets on days the NYSE is closed. The value of the Fund's assets may
change on days you cannot purchase or redeem Shares. NAV is determined at the
end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is
open. The Fund generally values fixed income securities as determined by an
independent pricing service.

The Fund's current NAV and public offering price may be found in the mutual
funds section of certain local newspapers under "Federated" and the appropriate
class designation listing.

The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.

<PAGE>

Maximum Sales Charge
Minimum Initial/Subsequent Front-End Sales Contingent
Shares Offered Investment Amounts1 Charge2 Deferred Sales
Charge3
Class A $1,500/$100 4.50% 0.00%
Class B $1,500/$100 None 5.50%
Class C $1,500/$100 None 1.00%
</TABLE>

1 The minimum initial and subsequent investment amounts for retirement plans are
$250 and $100, respectively. The minimum subsequent investment amounts for
Systematic Investment Programs is $50. Investment professionals may impose
higher or lower minimum investment requirements on their customers than those
imposed by the Fund. Orders for $250,000 or more will be invested in Class A
Shares instead of Class B Shares to maximize your return and minimize the sales
charges and marketing fees. Accounts held in the name of an investment
professional may be treated differently. Class B Shares will automatically
convert into Class A Shares after eight full years from the purchase date. This
conversion is a non-taxable event. 2 Front-End Sales Charge is expressed as a
percentage of public offering price. See "Sales Charge When You Purchase." 3 See
"Sales Charge When You Redeem."

SALES CHARGE WHEN YOU PURCHASE
Class A Shares

<PAGE>

Sales Charge as a Sales Charge as a
Purchase Amount Percentage of Public Percentage of NAV
Offering Price
Less than $100,000 4.50% 4.71% $100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56% $500,000 but less than $1 million
2.00% 2.04% $1 million or greater1 0.00% 0.00% 1 A contingent deferred sales
charge of 0.75% of the redemption amount applies to Class A Shares redeemed up
to 24 months after purchase under certain investment programs where an
investment professional received an advance payment on the transaction. The
sales charge at purchase may be reduced or eliminated by:

o purchasing Shares in greater quantities to reduce the applicable sales
charge;

o combining concurrent purchases of Shares:

- - by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Federated Funds (other than money
market funds); o accumulating purchases (in calculating the sales charge on an
additional purchase, include the current
value of previous Share purchases still invested in the Fund); or

o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

The sales charge will be eliminated when you purchase Shares:

o within 120 days of redeeming Shares of an equal or lesser amount;

o by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);

o through wrap accounts or other investment programs where you pay the
investment professional directly for services;

o through investment professionals that receive no portion of the sales
charge;

o as a Federated Life Member (Class A Shares only) and their immediate family
members; or

o as a Director or employee of the Fund, the Adviser, the Distributor and their
affiliates, and the immediate family members of these individuals.

If your investment qualifies for a reduction or elimination of the sales charge,
you or your investment professional should notify the Fund's Distributor at the
time of purchase. If the Distributor is not notified, you will receive the
reduced sales charge only on additional purchases, and not retroactively on
previous purchases.

SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).

Class A Shares
A CDSC of 0.75% of the redemption amount applies to Class A Shares redeemed up
to 24 months after purchase under certain investment programs where an
investment professional received an advance payment on the transaction.

Class B Shares
Shares Held Up To: CDSC
1 year 5.50%
2 years 4.75%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 years or more 0.00%
Class C Shares
You will pay a 1% CDSC if you redeem Shares within one year
of the purchase date.

You will not be charged a CDSC when redeeming Shares:

o purchased with reinvested dividends or capital gains;

o purchased within 120 days of redeeming Shares of an equal or lesser amount;

o that you exchanged into the same share class of another Federated Fund if the
shares were held for the applicable CDSC holding period (other than a money
market fund);

o purchased through investment professionals who did not receive advanced
sales payments;

o if, after you purchase Shares, you become disabled as defined by the IRS;

o if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;

o if your redemption is a required retirement plan distribution; or

o upon the death of the last surviving shareholder of the account.

If your redemption qualifies, you or your investment professional should notify
the Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.

To keep the sales charge as low as possible, the Fund redeems your Shares in
this order:

o Shares that are not subject to a CDSC; and

o Shares held the longest (to determine the number of years your Shares have
been held, include the time you held shares of other Federated Funds that
have been exchanged for Shares of this Fund).

The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.

HOW IS THE FUND SOLD?

The Fund offers four share classes: Class A Shares, Class B Shares, Class C
Shares, and Class F Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Class A Shares, Class B Shares, and
Class C Shares. Each share class has different sales charges and other 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 institutions or to individuals, directly or through
investment professionals.

When the Distributor receives marketing fees and sales charges, 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 Class A Shares, Class B Shares, and Class C
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, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.

Where the Fund offers more than one share class and you do not specify the class
choice on your New Account Form or form of payment (e.g., Federal Reserve wire
or check) you automatically will receive Class A Shares.

THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and

o 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 three
business days. 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

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

o Send your payment to the Fund by Federal Reserve wire or check according to
the instructions in the sections "By Wire" or "By 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 incurred by the Fund or Federated Shareholder Services Company,
the Fund's transfer agent.

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).

THROUGH AN EXCHANGE
You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or by contacting the Fund or your investment
professional.

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.

RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.

<PAGE>

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

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

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

THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption or exchange 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 or exchange Shares by calling the Fund at 1-800-341-7400 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 or exchange 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:

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

o amount to be redeemed or exchanged;

o signatures of all shareholders exactly as registered; and

o if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

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

Signature Guarantees Signatures must be guaranteed if:

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

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

o a redemption is payable to someone other than the shareholder(s) of record;
or

o if exchanging (transferring) into another fund with a different shareholder
registration.

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:

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

o 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:

o to allow your purchase to clear;

o during periods of market volatility; or

o 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.

REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.

EXCHANGE PRIVILEGE
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM
You may automatically redeem or exchange Shares in a minimum amount of $100 on a
regular basis. Complete the appropriate section of the New Account Form or an
Account Service Options Form or contact your investment professional or the
Fund. Your account value must meet the minimum initial investment amount at the
time the program is established. This program may reduce, and eventually
deplete, your account. Payments should not be considered yield or income.
Generally, it is not advisable to continue to purchase Class A Shares subject to
a sales charge while redeeming Shares using this program.

Systematic Withdrawal Program (SWP) On Class B Shares You will not be charged a
CDSC on SWP redemptions if:

o you redeem 12% or less of your account value in a single year;

o you reinvest all dividends and capital gains distributions; and

o your account has at least a $10,000 balance when you establish the SWP. (You
cannot aggregate multiple Class B Share accounts to meet this minimum
balance.)

You will be subject to a CDSC on redemption amounts that exceed the 12% annual
limit. In measuring the redemption percentage, your account is valued when you
establish the SWP and then annually at calendar year-end. You can redeem
monthly, quarterly, or semi-annually.

For SWP accounts established prior to April 1, 1999, your account must be at
least one year old in order to be eligible for the waiver of the CDSC.

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 or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange 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 and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends monthly to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date. The record
date is the date on which a shareholder must officially own Shares in order to
earn a dividend.

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 dividend or 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 dividend or
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, non-retirement
accounts may be closed if redemptions or exchanges 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 and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.

WHO MANAGES THE FUND?

The Board of Directors 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 June 1992. He
is Vice President of the Fund. 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.

Mark E. Durbiano

Mark E. Durbiano has been the Fund's portfolio manager since June 1992. Mr.
Durbiano joined Federated in 1982 and has been a Senior Portfolio Manager and a
Senior Vice President of the Fund's Adviser since 1996. From 1988 through 1995,
Mr. Durbiano was a Portfolio Manager and a Vice President of the Fund's Adviser.
Mr. Durbiano is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Pittsburgh.

Advisory Fees
The Adviser receives an annual investment advisory fee of 0.75% 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.

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.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. 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 Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(To be filed by amendment.)

<PAGE>

FEDERATED BOND FUND

A Portfolio of Investment Series Funds, Inc.

(Effective on or about February 1, 2000, Investment Series Funds, Inc. will be
named Federated Investment Series Funds, Inc.)

class a shares

class b shares

class c shares

A Statement of Additional Information (SAI) dated December 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's Management Discussion & Analysis 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 writing to or
visiting the Public Reference Room in Washington, D.C. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected]. or by writing to the SEC's Public
Reference Section, Washington, D.C 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.

Investment Company Act File No. 811-07021
Cusip 461444507

(Effective February 1, 2000, the CUSIP number will be ____)

Cusip 461444606

(Effective February 1, 2000, the CUSIP number will be ____)

Cusip 461444705

(Effective February 1, 2000, the CUSIP number will be ____)

G01271-01 (12/99)

Prospectus

FEDERATED BOND FUND

A Portfolio of Investment Series Funds, Inc.

(Effective on or about February 1, 2000, Investment Series Funds, Inc. will be
named Federated Investment Series Funds, Inc.)

class f shares

december 31, 1999

<PAGE>

RISK/RETURN SUMMARY

o Interest Rate Risk. Prices of fixed income securities generally fall when
interest rates rise.

o Liquidity Risks. The fixed income securities in which the Fund invests may
be less readily marketable and may be subject to greater fluctuation in
price than other securities.

<PAGE>

Risk/Return Bar Chart and Table
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class F Shares of Federated Bond Fund as of the calendar
year-end for each of ten years.

The `y' axis reflects the "% Total Return" beginning with "-10.00%" and
increasing in increments of 10.00% up to 50.00%.

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 Class F
Shares of the Fund 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: 1.32%, (9.59%), 44.62%, 15.94%, 16.31%, (3.36%), 20.18%, 5.40%, 10.92%, and
5.62%.

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

The total returns displayed for the Fund's Class F Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.

The Fund's Class F Shares total return for the nine-month period from January 1,
1999 to September 30, 1999 was (2.35%).

Within the period shown in the Chart, the Fund's Class F Shares highest
quarterly return was 21.02% (quarter ended March 31, 1991). Its lowest quarterly
return was (7.31%) (quarter ended September 30, 1990).

Average Annual Total Return Table
The following table represents the Fund's Class F Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar periods
ended December 31, 1998. The table shows the Fund's Class F Shares total returns
averaged over a period of years relative to the Lehman Brothers Corporate Bond
Index (LBCBI), which is a broad-based market index, and the Lipper Corporate
Debt Funds BBB Rated Average (LCDBBB), an average of funds with similar
investment objectives. The LBCBI is comprised of a large universe of bonds
issued by industrial, utility and financial companies which have a minimum
rating of Baa by Moody's Investors Service, Inc., BBB by Standard and Poor's or,
in the case of bank bonds not rated by either of the previously mentioned
services, BBB by Fitch IBCA, Inc. Total returns for the indexes 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 Class F LBCBI LCDBBB
1 Year 3.61%
5 Years 7.26%
10 Years 9.75%
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
returns.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

federated bond fund

Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund's Class F Shares.

<S> <C>

Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering 1.00%
price)
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase 1.00%
price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other None
Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

Annual Fund Operating Expenses (Before Waivers)(1) Expenses That are Deducted
From Fund Assets (as a percentage of average net assets) Management Fee(2) 0.75%
Distribution (12b-1) Fee None Shareholder Services Fee(3) 0.25% Other Expenses
0.20% Total Annual Fund Operating Expenses 1.20% 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 actually paid for the fiscal year ended October 31, 1999.
Total Waiver of Fund Expenses 0.12%
Total Actual Annual Fund Operating Expenses (after waivers) 1.08%
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 (after the voluntary waiver) was 0.65% for the year ended October
31, 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 Shares (after the voluntary reduction) 0.23% for the year ended
October 31, 1999.
</TABLE>

Example
This Example is intended to help you compare the cost of investing in the Fund's
Class F Shares with the cost of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund's Class F Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that the Fund's Class
F 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 3 Years 5 Years 10 Years
Expenses assuming redemption $321 $577 $853 $1,540
Expenses assuming no redemption $221 $477 $753 $1,540

</TABLE>

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

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 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.
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.
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: o it is
organized under the laws of, or has a principal office located in, another
country; o the principal trading market for its securities is in another
country; or o 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.
Substantially all of the Fund's foreign securities are denominated in U.S.
dollars.

Securities rated BBB by Standard and Poor's or Baa by Moody's Investors
Services, Inc., also known as junk bonds or high yield bonds, have speculative
characteristics.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

WHAT DO SHARES COST?

The Fund's current NAV and public offering price may be found in the mutual
funds section of certain local newspapers under "Federated" and the appropriate
class designation listing.

Maximum Sales Charge
Minimum Initial/Subsequent Front-End Sales Contingent
Shares Offered Investment Amounts1 Charge2 Deferred Sales
Charge3
</TABLE>

Class F $1,500/$100 1.00% 1.00% 1 The minimum initial and subsequent
investment amounts for retirement plans are $250 and $100, respectively. The
minimum subsequent investment amounts for Systematic Investment Programs is $50.
Investment professionals may impose higher or lower minimum investment
requirements on their customers than those imposed by the Fund. 2 Front-End
Sales Charge is expressed as a percentage of public offering price. See "Sales
Charge When You Purchase." 3 See "Sales Charge When You Redeem."

<PAGE>

SALES CHARGE WHEN YOU PURCHASE
Class F Shares

<PAGE>

Sales Charge as a Sales Charge as a
Purchase Amount Percentage of Public Percentage of NAV
Offering Price
Less than $1 million 1.00% 1.01%
$1 million or greater 0.00% 0.00%

The sales charge at purchase may be reduced or eliminated by:

o purchasing Shares in greater quantities to reduce the applicable sales
charge;

o combining concurrent purchases of Shares:

o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

The sales charge will be eliminated when you purchase Shares:

o within 120 days of redeeming Shares of an equal or lesser amount;

o when the Fund's Distributor does not advance payment to the investment
professional for your purchase;

o by exchanging shares from the same share class of another Federated Fund;

o for trusts or pension or profit-sharing plans where the third-party
administrator has an arrangement with the Fund's Distributor or its
affiliates to purchase shares without a sales charge; or

o through investment professionals that receive no portion of the sales
charge.

SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).

Class F Shares
Purchase Amount Shares Held CDSC
Up to $2 million 4 years or less 1.00%
$2 - $5 million 2 years or less 0.50%
$5 million or more 1 year or less 0.25%