INVESTMENT SERIES FUNDS INC, 485BPOS, 1999-12-29

INVESTMENT SERIES FUNDS INC
485BPOS, 1999-12-29

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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. 19 .............. X
--------------------- ----------

and/or

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

Amendment No. 20 .................................... X
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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)
X on December 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 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.

<TABLE>
<CAPTION>
CONTENTS
<S> <C>
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? 8
How is the Fund Sold? 11
How to Purchase Shares 11
How to Redeem and Exchange Shares 13
Account and Share Information 15
Who Manages the Fund? 16
Financial Information 17
</TABLE>

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

NOT FDIC INSURED

MAY LOSE VALUE

NO BANK GUARANTEE

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

DECEMBER 31, 1999

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.
The Adviser may lengthen or shorten duration from time to time based on its
interest rate outlook, but the Fund has no set duration parameters. 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 Risks

Prices of fixed income securities generally fall when interest rates rise.
Interest rate changes have a greater effect on the price of fixed income
securities with longer durations.

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.

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.

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.

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.

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 5.00% up to 15.00%.
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 Fund's Class B Shares are sold subject to a contingent deferred sales charge
(load). 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 Shares, Class B Shares, 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 Shares, Class B Shares, 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 Ratings Group 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 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.

Start of
Calendar Period 1 Year Performance/1/
- -----------------------------------------------------------------------
<S> <C> <C>
Class A 0.81% 6.92%
- -----------------------------------------------------------------------
Class B (0.70%) 6.79%
- -----------------------------------------------------------------------
Class C 3.75% 7.51%
- -----------------------------------------------------------------------
LBCBI 8.57% 8.69%
- -----------------------------------------------------------------------
LCDBBB 6.09% 8.03%
- -----------------------------------------------------------------------
</TABLE>

1 The start of performance dates for Class A Shares, Class B Shares, and Class
C Shares 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.

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
the Fund's Class A Shares, Class B Shares or Class C Shares.

Shareholder Fees Class A Class
B Class C
Fees Paid Directly From Your Investment
<S> <C>
<C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) 4.50% None None Maximum Deferred Sales Charge (Load) (as a percentage of
original purchase price or
redemption proceeds, as applicable) None
5.50% 1.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions)
(as a percentage of offering price) None
None None
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 0.25%/3/
0.75% 0.75%
Shareholder Services Fee 0.25%/4/
0.25% 0.25%
Other Expenses 0.22%
0.22% 0.22%
Total Annual Fund Operating Expenses 1.47%
1.97%/5/ 1.97%
- -------------------------------------------------------------------------------------------------------------------------------
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 0.41%
0.11% 0.11%
Total Actual Annual Fund Operating Expenses (after waivers) 1.06% 1.86% 1.86%
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 (after the voluntary waiver) was 0.64%
for the fiscal 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 provider has voluntarily waived a portion of the shareholder services fee. This
voluntary waiver can be
terminated at any time. The shareholder services fee paid by the Fund's Class A Shares (after the voluntary
waiver) was 0.20%
for the fiscal 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>

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's
Class A Shares, Class B Shares, and Class 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 Shares,
Class B Shares, and Class 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 Shares, Class B Shares, and
Class 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
<S> <C> <C> <C> <C>
Expenses assuming
redemption $593 $ 894 $1,217 $2,128
- ----------------------------------------------------------------------------
Expenses assuming no
redemption $593 $ 894 $1,217 $2,128
- ----------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------
Expenses assuming
redemption $750 $1,018 $1,262 $2,167
- ----------------------------------------------------------------------------
Expenses assuming no
redemption $200 $ 618 $1,062 $2,167
- ----------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------
Expenses assuming $300 $ 618 $1,062 $2,296
redemption
- ----------------------------------------------------------------------------
Expenses assuming no $200 $ 618 $1,062 $2,296
redemption
</TABLE>

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, but the Fund has no set duration parameters. 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:

.. 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 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:

.. 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.

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

.. 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.

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.

RISKS ASSOCIATED WITH NONINVESTMENT
GRADE SECURITIES

.. 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

.. 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.

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.

Minimum Maximum Sales Charge
Initial/ ----------------------------
Subsequent Front-End Contingent
Investment Sales Deferred Sales
Shares Offered Amounts/1/ Charge/2/ Charge/3/
- ------------------------------------------------------------------
<S> <C> <C> <C>
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
- --------------------------------------------------------------------
Sales Charge Sales Charge
as a Percentage as Percentage
Purchase Amount of Public of NAV
Offering Price
<S> <C> <C>
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 greater/1/ 0.00% 0.00%
- --------------------------------------------------------------------
</TABLE>

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.

If your investment qualifies for a reduction or elimination of the sales charge
as described below, 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.

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

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

.. 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);

.. 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

.. 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:

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

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

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

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

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

.. 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
- ----------------------------------------------------------------
<S> <C>
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%
- ----------------------------------------------------------------
</TABLE>

Class C Shares
- ----------------------------------------------------------------
You will pay a 1% CDSC if you redeem Shares within one year of the purchase
date.

If your investment qualifies for a reduction or elimination of the CDSC as
described below, you or your investment professional should notify the
Distributor at the time of redemption. If the Distributor is not notified, the
CDSC will apply.

You will not be charged a CDSC when redeeming Shares:

.. purchased with reinvested dividends or capital gains;

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

.. 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);

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

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

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

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

.. 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:

.. Shares that are not subject to a CDSC; and

.. 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

.. 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 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

.. 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 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.

HOW TO REDEEM AND
EXCHANGE SHARES

You should redeem or exchange 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 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:

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

.. amount to be redeemed or exchanged;

.. signatures of all shareholders exactly as registered; and

.. 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:

.. 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;
or

.. 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:

.. 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.

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:

.. ensure that the account registrations are identical;

.. meet any minimum initial investment requirements; and

.. 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:

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

.. you reinvest all dividends and capital gains distributions; and

.. 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.

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.

Financial Highlights--Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Year Ended October 31 1999/1/ 1998 1997
1996 1995/2/
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $9.82 $10.02 $9.72
$9.76 $9.64
Income From Investment Operations:
Net investment income 0.67 0.70 0.74
0.71 0.26
Net realized and unrealized gain (loss) on
investments (0.70) (0.19) 0.26
(0.04) 0.11
TOTAL FROM INVESTMENT OPERATIONS (0.03) 0.51 1.00
0.67 0.37
Less Distributions:
Distributions from net investment income (0.68) (0.71) (0.70)
(0.71) (0.25)
Net Asset Value, End of Period $9.11 $9.82 $10.02
$9.72 $9.76
Total Return3 (0.35%) 5.14% 10.73%
7.21% 3.92%

Ratios to Average Net Assets:
Expenses4 1.22% 1.20% 1.25%
1.30% 1.37%/5/
Net investment income4 6.91% 6.74% 7.10%
7.21% 7.87%/5/
Expenses (after waivers) 1.06% 1.05% 1.05%
1.05% 1.02%/5/
Net investment income (after waivers) 7.07% 6.89% 7.30%
7.46% 8.22%/5/
Supplemental Data:
Net assets, end of period (000 omitted) $249,056 $210,768 $111,377
$37,045 $5,070
Portfolio turnover 31% 20% 55%
49% 77%
</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte &
Touche LLP. Each of the previous years was audited by other auditors.

2 Reflects operations for the periods from June 28, 1995 (date of initial
public investment) to October 31, 1995.

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

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

5 Computed on an annualized basis.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.

FINANCIAL HIGHLIGHTS--CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Year Ended October 31 1999/1/ 1998 1997
1996 1995/2/
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $9.83 $10.02 $9.72
$9.76 $9.64
Income From Investment Operations:
Net investment income 0.60 0.61 0.64
0.64 0.24
Net realized and unrealized gain (loss)
on investments (0.70) (0.18) 0.28
(0.04) 0.11
TOTAL FROM INVESTMENT OPERATIONS (0.10) 0.43 0.92
0.60 0.35
Less Distributions:
Distributions from net investment income (0.61) (0.62) (0.62)
(0.64) (0.23)
Net Asset Value, End of Period $9.12 $9.83 $10.02
$9.72 $9.76
Total Return/3/ (1.11%) 4.34% 9.86%
6.40% 3.72%

Ratios to Average Net Assets:
Expenses/4/ 1.97% 1.95% 2.00%
2.05% 2.11%/5/
Net investment income/4/ 6.16% 5.99% 6.35%
6.46% 7.06%/5/
Expenses (after waivers) 1.86% 1.85% 1.85%
1.85% 1.81%/5/
Net investment income (after waivers) 6.27% 6.09% 6.50%
6.66% 7.36%/5/
Supplemental Data:
Net assets, end of period (000 omitted) $345,034 $302,010 $191,600
$125,620 $27,768
Portfolio turnover 31% 20% 55%
49% 77%
</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte &
Touche LLP. Each of the previous years was audited by other auditors.

2 Reflects operations for the periods from June 28, 1995 (date of initial
public investment) to October 31, 1995.

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

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

5 Computed on an annualized basis.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.

FINANCIAL HIGHLIGHTS--CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Ratios to Average Net Assets:
Expenses/4/ 1.97% 1.95% 2.00%
2.05% 2.11%/5/
Net investment income/4/ 6.16% 5.99% 6.35%
6.50% 7.01%/5/
Expenses (after waivers) 1.86% 1.85% 1.85%
1.85% 1.81%/5/
Net investment income (after waivers) 6.27% 6.09% 6.50%
6.70% 7.31%/5/
Supplemental Data:
Net assets, end of period (000 omitted) $92,875 $76,645 $39,398
$22,897 $5,508
Portfolio turnover 31% 20% 55%
49% 77%
</TABLE>

1 For the year ended October 31, 1999, the Fund was audited by Deloitte &
Touche LLP. Each of the previous years was audited by other auditors.

2 Reflects operations for the periods from June 28, 1995 (date of initial
public investment) to October 31, 1995.

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

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

5 Computed on an annualized basis.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
Federated Bond Fund

NOTES

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
SemiAnnual Reports to shareholders as they become available. The Annual Report's
Management Discussion and 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, DC. 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, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.

[LOGO OF FEDERATED INVESTORS]

Federated Bond 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. 811-07021
Cusip 461444507

(Effective February 1, 2000, the CUSIP number will be 31420F103)

Cusip 461444606

(Effective February 1, 2000, the CUSIP number will be 31420F202)

Cusip 461444705

(Effective February 1, 2000, the CUSIP number will be 31420F301)

G01271-01 (12/99)

[LOGO OF FEDERATED INVESTORS]

WORLD-CLASS INVESTMENT MANAGER/SM/

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

P R O S P E C T U S

DECEMBER 31, 1999

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

<TABLE>
<CAPTION>
CONTENTS
<S> <C>
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? 8
How is the Fund Sold? 10
How to Purchase Shares 11
How to Redeem and Exchange Shares 12
Account and Share Information 14
Who Manages the Fund? 15
Financial Information 16

</TABLE>

Not FDIC Insured
May Lose Value
No Bank Guarantee

DECEMBER 31, 1999

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 Risks

Prices of fixed income securities generally fall when interest rates rise.
Interest rate changes have a greater effect on the price of fixed income
securities with longer durations.

Credit Risks

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.

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.

Risks of Foreign Investing

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 "-20.00%" and increasing in increments of 20.00% up to
60.00%. 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 Fund's Class F Shares are sold subject to a sales charge (load). 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 Brother 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
Ratings Group 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.

<TABLE>
<CAPTION>
Calendar Period 1 Year 5 Years 10 Years
<S> <C> <C> <C>
Class F 3.61% 7.26% 9.75%
LBCBI 8.57% 7.74% 9.86%
LCDBBB 6.09% 6.99% 9.20%
</TABLE>

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
the Fund's Class F Shares.

<TABLE>
<CAPTION>
<S>
<C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)...................................... 1.00%
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or....................................... 1.00%
redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other
Distributions)..................................... None
(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............................................................................................................
0.22%
Total Annual Fund Operating
Expenses...................................................................................... 1.22%

</TABLE>

/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 Waivers of Fund Expenses....................................... 0.13%
Total Actual Annual Operating Expenses (after waivers)............... 1.09%

/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 0.64% for the fiscal year ended
October 31, 1999.

/3/ The shareholder services provider has voluntarily waived a portion of the
shareholder services fee. This voluntary waiver can be terminated at any
time. The shareholder services fee paid by the Fund's Class F Shares (after
the voluntary waiver) was 0.23% for the fiscal year ended October 31, 1999.

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:

<TABLE>
<CAPTION>
Share Class 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class F
Expenses assuming $323 $583 $764 $1,563
redemption
Expenses assuming no $223 $483 $764 $1,563
redemption
</TABLE>

What are the Fund's Investment Strategies?

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.

.. 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 relative risks and 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 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

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.

Substantially all of the Fund's foreign securities are denominated in U.S.
dollars.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

INVESTMENT RATINGS

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

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.

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.

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

RISKS OF FOREIGN INVESTING

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.

<TABLE>
<CAPTION>
Maximum Sales Charge

Minimum
Initial/
Subsequent Front-End Contingent
Investment Sales Deferred
Shares Offered Amounts/1/ Charge/2/ Sales Charge/3/
<S> <C> <C> <C>
Class F $1,500/$100 1.00% 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.
/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

Sales Charge as
a Percentage of Sales Charge as
Class F Shares Public Offering a Percentage of
Purchase Amount Price NAV
<S> <C> <C>
Less than $1 million 1.00% 1.01%
$1 million or greater 0.00% 0.00%
</TABLE>

If your investment qualifies for an elimination of the sales charge as described
below, 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.

The sales charge at purchase may be eliminated by:

.. purchasing Shares in greater quantities to reduce the applicable sales
charge;
.. 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);
.. 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
.. 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:
.. within 120 days of redeeming Shares of an equal or lesser amount;
.. when the Fund's Distributor does not advance payment to the investment
professional for your purchase;
.. by exchanging shares from the same share class of another Federated Fund;
.. 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
.. through investment professionals that receive no portion of the sales charge.

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 F Shares
Purchase Amount Shares Held CDSC
<S> <C> <C>
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%
</TABLE>

You will not be charged a CDSC when redeeming Shares:
.. purchased with reinvested dividends or capital gains;
.. purchased within 120 days of redeeming Shares of an equal or lesser amount;
.. 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);
.. purchased through investment professionals who did not receive advanced sales
payments;
.. if, after you purchase Shares, you become disabled as defined by the IRS;
.. if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;
.. if your redemption is a required retirement plan distribution; or
.. upon the death of the last surviving shareholder of the account.

To keep the sales charge as low as possible, the Fund redeems your Shares in
this order:
.. Shares that are not subject to a CDSC; and
.. 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 F 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.

How 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 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
.. 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 according to
the instructions in the sections "By Wire" or "By 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).

THROUGH AN EXCHANGE

BY SYSTEMATIC INVESTMENT PROGRAM

BY AUTOMATED CLEARING HOUSE (ACH)

RETIREMENT INVESTMENTS

How to Redeem and Exchange Shares

You should redeem or exchange 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 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:
.. Fund Name and Share Class, account number and account registration;
.. amount to be redeemed or exchanged;
.. signatures of all shareholders exactly as registered; and
.. 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:
.. 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;
or
.. if exchanging (transferring) into another fund with a different shareholder
registration.

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.

REDEMPTIONS FROM 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:
.. ensure that the account registrations are identical;
.. meet any minimum initial investment requirements; and
.. 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.

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 Shares subject to a sales
charge while redeeming Shares using this program.

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

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

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 Fund's portfolio managers are:

Joseph M. Balestrino

Mark E. Durbiano

ADVISORY FEES

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.

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 Deloitte & Touche 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)

<TABLE>
<S> <C> <C> <C>
<C> <C>
Year Ended October 31 1999/1/ 1998 1997
1996 1995
Net Asset Value, Beginning of Period $ 9.83 $ 10.02 $ 9.72 $
9.76 $ 9.08
Income From Investment
Operations:
Net investment income 0.67 0.69 0.72
0.71 0.79
Net realized and unrealized gain (loss) (0.70) (0.18) 0.28
(0.04) 0.65
on
investments
TOTAL FROM INVESTMENT OPERATIONS (0.03) 0.51 1.00
0.67 1.44
Less
Distributions:
Distributions from net investment income (0.68) (0.70) (0.70)
(0.71) (0.76)
Net Asset Value, End of Period $ 9.12 $ 9.83 $ 10.02 $
9.72 $ 9.76
Total Return/2/ (0.35%) 5.12% 10.70%
7.18% 16.51%

Ratios to Average Net
Assets:
Expenses3 1.22% 1.20% 1.25%
1.30% 1.34%
Net investment income/3/ 6.89% 6.74% 7.10%
7.16% 7.89%
Expenses (after waivers) 1.09% 1.08% 1.08%
1.08% 1.03%
Net investment income (after waivers) 7.02% 6.86% 7.27%
7.38% 8.20%
Supplemental
Data:
Net assets, end of period (000 omitted) $375,902 $393,905 $325,531
$267,720 $195,502
Portfolio turnover 31% 20% 55%
49% 77%
</TABLE>

/1/ For the year ended October 31, 1999, the Fund was audited by Deloitte &
Touche LLP. Each of the previous years was audited by other auditors.
/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 October 31, 1999, which can be obtained free of charge.

NOTES

[LOGO]
WORLD-CLASS INVESTMENT MANAGER(SM)

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

[Federated Logo]
Federated Bond 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. 811-07021
Cusip 461444309
(Effective February 1, 2000,

the CUSIP number will be 31420F400)

G01271-02-F (12/99)

Federated is a registered mark
of Federated investors, Inc.
1999 (c)Federated Investors, Inc.

[LOGO]
RECYCLED
PAPER

DECEMBER 31, 1999

STATEMENT OF ADDITIONAL INFORMATION

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
CLASS F SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Federated Bond Fund (Fund), dated
December 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.

DECEMBER 31, 1999

Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Exchanging Securities for Shares
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses

2041304b (12/99)

How is the Fund Organized?

The Fund is a diversified portfolio of Investment Series Funds, Inc.
(Corporation). Effective on or about February 1, 2000, Investment Series Funds,
Inc. will be named Federated Investment Series Funds, Inc. The Corporation is an
open-end, management investment company that was established under the laws of
the State of Maryland on May 19, 1992. The Corporation may offer separate series
of shares representing interests in separate portfolios of securities. On May
20, 1994, Class A and Class C Shares were added to the Fund. On May 19, 1995,
Class B Shares were added. On June 27, 1995, shareholders approved the name of
the Fund to be changed to Federated Bond Fund. On June 2, 1996, the name of the
Fund's "Fortress Shares" class was changed to "Class F Shares."

The Board of Directors (the Board) has established four classes of shares of the
Fund, known as Class A Shares, Class B Shares, Class C Shares and Class F Shares
(Shares). This SAI relates to all classes of Shares. The Fund's investment
adviser is Federated Investment Management Company (Adviser). The Adviser,
formerly known as Federated Advisers, changed its name effective March 31, 1999.

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

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

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.

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.

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. As a matter of operating policy, the lowest rated municipal debt
obligations in which the Fund will invest will be rated BBB or better by an
NRSRO, or which are of comparable quality in the judgment of the Fund's
Adviser.

Mortgage Backed Securities

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.

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 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. All CMOs purchased by the Fund are investment grade, as
rated by an NRSRO.

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.

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. The total acceptances of any bank held by the Fund cannot exceed 0.25%
of such bank's total deposits according to the bank's last published statement
of condition preceding the date of acceptance.

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 interest rate and credit risks of a zero coupon security.

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.

Equity Securities

Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business.
Generally, less than 10% of the value of the Fund's total assets will be
invested in equity securities. The Adviser may choose to exceed this 10%
limitation if unusual market conditions suggest such investments represent a
better opportunity to reach the Fund's investment objective. The following
describes the types of equity securities in which the Fund invests.

Common Stocks

Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.

Preferred Stocks

Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the stock.
The Fund will treat such redeemable preferred stock as a fixed income
security.

Interests in Other Limited Liability Companies

Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.

Real Estate Investment Trusts (REITs)

REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial
real estate market.

Warrants

Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the
expiration date). The Fund may buy the designated securities by paying the
exercise price before the expiration date. Warrants may become worthless if
the price of the stock does not rise above the exercise price by the
expiration date. This increases the market risks of warrants as compared to
the underlying security. Rights are the same as warrants, except companies
typically issue rights to existing stockholders.

Convertible Securities

Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities 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 fixed
income 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 fixed income securities.

Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.

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

The Fund does not limit convertible securities by rating, and there is no
minimal acceptance rating for a convertible security to be purchased or held in
the Fund. Therefor, the Fund invests in convertible securities irrespective of
their ratings. This could result in the Fund purchasing and holding, without
limit, convertible securities rated below investment grade by an NRSRO.

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

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. Trading
in certain foreign markets is also subject to liquidity risks.

Depositary Receipts

Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for
foreign exchange transactions. The foreign securities underlying European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and
International Depositary Receipts (IDRs), are traded globally or outside the
United States. Depositary receipts involve many of the same risks of investing
directly in foreign securities, including 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.

Foreign Government Securities

Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies. Examples of these include, but are not limited to, the International
Bank for Reconstruction and Development (the World Bank), the Asian
Development Bank, the European Investment Bank and the Inter-American
Development Bank.

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

The Fund reserves the right to invest up to 25% of its total assets in fixed
income securities of foreign governmental units located within an individual
foreign nation.

Hedging
Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may also attempt to hedge by using combinations of different derivatives
contracts, or derivatives contracts and securities. The Fund's ability to hedge
may be limited by the costs of the derivatives contracts. The Fund may attempt
to lower the cost of hedging by entering into transactions that provide only
limited protection, including transactions that (1) hedge only a portion of its
portfolio, (2) use derivatives contracts that cover a narrow range of
circumstances or (3) involve the sale of derivatives contracts with different
terms. Consequently, hedging transactions will not eliminate risk even if they
work as intended. In addition, hedging strategies are not always successful, and
could result in increased expenses and losses to the Fund.

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 interest
rate 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 can buy
or sell futures contracts on portfolio securities or indexes and engage in
foreign currency forward contracts. The Fund may buy or sell futures contracts
on portfolio securities or indexes and engage in foreign currency forward
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 put options on financial futures contracts (including index
futures) and portfolio securities and listed put options on futures in
anticipation of a decrease in the value of the underlying asset.

The Fund may also write call options on futures contracts and portfolio
securities 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.

When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts.

The Fund currently does not intend to invest more than 5% of its total assets
in options transactions.

The Fund will only purchase puts on financial futures contracts which are
traded on a nationally recognized exchange. The call options which the Fund
writes and sells must be listed on a recognized options exchange. Although the
Fund reserves the right to write covered call options on its entire portfolio,
it will not write such options on more than 25% of its total assets unless a
higher limit is authorized by its Directors.

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.

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.

Hybrid Instruments

Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of the
interest or principal payable on a hybrid security is determined by reference
to changes in the price of an underlying asset or by reference to another
benchmark (such as interest rates, currency exchange rates or indices). Hybrid
instruments also include convertible securities with conversion terms related
to an underlying asset or benchmark.

The risks of investing in hybrid instruments reflect a combination of the
risks of investing in securities, options, futures and currencies, and depend
upon the terms of the instrument. Thus, an investment in a hybrid instrument
may entail significant risks in addition to those associated with traditional
fixed income or convertible securities. Hybrid instruments are also
potentially more volatile and carry greater interest rate risks than
traditional instruments. Moreover, depending on the structure of the
particular hybrid, it may expose the Fund to leverage risks or carry liquidity
risks.

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.

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 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.

Inter-fund Borrowing and Lending Arrangements

The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. ("Federated funds") to
lend and borrow money for certain temporary purposes directly to and from
other Federated funds. Participation in this inter-fund lending program is
voluntary for both borrowing and lending funds, and an inter-fund loan is only
made if it benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board, and the Board monitors
the operation of the program. Any inter-fund loan must comply with certain
conditions set out in the exemption, which are designed to assure fairness and
protect all participating funds.

For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the "Repo Rate") and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the "Bank Loan Rate"), as determined by the Board. The interest
rate imposed on inter-fund loans is the average of the Repo Rate and Bank Loan
Rate.

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.

Fixed Income Securities Investment Risks

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

.. 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.

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 Noninvestment Grade Securities

Risks of Foreign Investing

Equity Securities Investment Risks

Stock Market Risks

.. The value of equity securities in the Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The
Fund's portfolio will reflect changes in prices of individual portfolio
stocks or general changes in stock valuations. Consequently, the Fund's share
price may decline.

.. The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company's equity securities. However, diversification will
not protect the Fund against widespread or prolonged declines in the stock
market.

Sector Risks

.. Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the
Adviser allocates more of the Fund's portfolio holdings to a particular
sector, the Fund's performance will be more susceptible to any economic,
business or other developments which generally affect that sector.

Liquidity Risks

.. Trading opportunities are more limited for equity securities that are not
widely held. This 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.

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

Risks of Foreign Investing

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

The Fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital. The investment objective may
not be changed by the Fund's Directors without shareholder approval.

INVESTMENT LIMITATIONS

Issuing Senior Securities And Borrowing Money

The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.

Diversification of Investments

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

Investing in Real Estate

The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interest therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.

Investing in Commodities

The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.

Underwriting

The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.

Lending Cash or Securities

The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.

Concentration of Investments

The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.

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.

Buying on Margin

The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities, and further provided that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions, and other financial contracts or
derivative instruments.

Pledging Assets

The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.

Investing in Restricted and Illiquid Securities

The Fund may invest in restricted securities, and, as a matter of fundamental
investment policy, which may not be changed without shareholder approval, will
limit such investments to no more than 10% of its net assets. Restricted
securities are any securities in which the Fund may invest pursuant to its
investment objective and policies but which are subject to restrictions on
resale under federal securities law. Under criteria established by the Trustees,
certain restricted securities are determined to be liquid. To the extent that
restricted securities are not determined to be liquid the Fund will limit their
purchase, together with other illiquid securities, to 15% of its net assets.

Writing Covered Call Options and Purchasing Put Options

The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the amount
of any further payment. The Fund will not purchase put options on securities
unless the securities are held in the Fund's portfolio.

Investing in Securities of Other Investment Companies

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

In applying the concentration restriction, (a) utility companies will be divided
according to their services (for example, gas, gas transmission, electric and
telephone will be considered a separate industry); (b) financial service
companies will be classified according to the end users of their services (for
example, automobile finance, bank finance and diversified finance will each be
considered a separate industry); and (c) asset-backed securities will be
classified according to the underlying assets securing such securities. To
conform to the current view of the SEC staff that only domestic bank instruments
may be excluded from industry concentration limitations, as a matter of non-
fundamental policy, the Fund will not exclude foreign bank instruments from
industry concentration limitation tests so long as the policy of the SEC remains
in effect. In addition, investments in bank instruments, and investments in
certain industrial development bonds funded by activities in a single industry,
will be deemed to constitute investment in an industry, except when held for
temporary defensive purposes. The investment of more than 25% of the value of
the Fund's total assets in any one industry will constitute "concentration."

As a matter of non-fundamental policy, for purposes of the commodities policy,
investments in transactions involving futures contracts and options, forward
currency contracts, swap transactions and other financial contracts that settle
by payment of cash are not deemed to be investments in commodities.

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 limitations, the Fund considers instruments issued by a U.S.
branch of a domestic bank having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items."

Investment Ratings for Investment Grade Securities

If a security is downgraded below the minimum quality grade discussed above, the
Adviser will reevaluate the security, but will not be required to sell it.

DETERMINING MARKET VALUE OF SECURITIES

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

.. for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

.. in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;

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

.. futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of trading
on such exchanges. Options traded in the over-the-counter market are
generally valued according to the mean between the last bid and the last
asked price for the option as provided by an investment dealer or other
financial institution that deals in the option. The Board may determine in
good faith that another method of valuing such investments is necessary to
appraise their fair market value;

.. 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.

REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE

You can reduce or eliminate the applicable front-end sales charge, as follows:

Quantity Discounts

Larger purchases of the same Share class reduce or eliminate the sales charge
you pay. You can combine purchases of Shares made on the same day by you, your
spouse and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.

Accumulated Purchases

If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.

Concurrent Purchases

You can combine concurrent purchases of the same share class of two or more
Federated Funds in calculating the applicable sales charge.

Letter of Intent - Class A Shares and Class F Shares

You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13-month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.

Reinvestment Privilege

You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.

Purchases by Affiliates of the Fund

The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:

.. the Directors, employees and sales representatives of the Fund, the Adviser,
the Distributor and their affiliates;
.. any associated person of an investment dealer who has a sales agreement with
the Distributor; and
.. trusts, pension or profit-sharing plans for these individuals.

Federated Life Members

Shareholders of the Fund known as "Federated Life Members" are exempt from
paying any front-end sales charge. These shareholders joined the Fund
originally:

.. through the "Liberty Account," an account for Liberty Family of Funds
shareholders on February 28, 1987 (the Liberty Account and Liberty Family of
Funds are no longer marketed); or

.. as Liberty Account shareholders by investing through an affinity group prior
to August 1, 1987.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:

.. following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;

.. representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of
70 1/2;

.. of Shares that represent a reinvestment within 120 days of a previous
redemption;

.. of Shares held by the Directors, employees, and sales representatives of the
Fund, the Adviser, the Distributor and their affiliates; employees of any
investment professional that sells Shares according to a sales agreement with
the Distributor; and the immediate family members of the above persons;

.. of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator
has entered into certain arrangements with the Distributor or its affiliates,
or any other investment professional, to the extent that no payments were
advanced for purchases made through these entities;

.. which are involuntary redemptions processed by the Fund because the accounts
do not meet the minimum balance requirements;

Class B Shares Only

.. which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program; and

Class F Shares Only

.. representing a total or partial distribution from a qualified plan. A total
or partial distribution does not include an account transfer, rollover or
other redemption made for purposes of reinvestment. A qualified plan does not
include an Individual Retirement Account, Keogh Plan, or a custodial account,
following retirement.

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.

FRONT-END SALES CHARGE REALLOWANCES

The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.

RULE 12B-1 PLAN (CLASS A, B AND C 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.

For some classes of Shares, 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.

Federated and its subsidiaries may benefit from arrangements where the Rule 12b-
1 Plan fees related to Class B Shares may be paid to third parties who have
advanced commissions to investment professionals.

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
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.

When an investment professional's customer purchases shares, the investment
professional may receive:

.. an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and C
Shares.

.. an amount on the NAV of Class F Shares purchased as follows: up to 1% on
purchases below $2 million; 0.50% on purchases from $2 million but below $5
million; and 0.25% on purchases of $5 million or more.

In addition, the Distributor may pay investment professionals 0.25% of the
purchase price of $1 million or more of Class A and Class F Shares that its
customer has not redeemed over the first year.

Class A Shares

Investment professionals purchasing Class A Shares for their customers are
eligible to receive an advance payment from the Distributor based on the
following breakpoints:

<TABLE>
<CAPTION>
Amount Advance Payments as a Percentage of Public Offering Price
<S> <C>
First $1 - $5 million 0.75%
Next $5 - $20 million 0.50%
Over $20 million 0.25%
</TABLE>

For accounts with assets over $1 million, the dealer advance payments reset
annually to the first breakpoint on the anniversary of the first purchase.

Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance payments will be paid only on
those purchases that were not previously subject to a front-end sales charge and
dealer advance payments. Certain retirement accounts may not be eligible for
this program.

A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase. The CDSC does not apply
under certain investment programs where the investment professional does not
receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.

Class F Shares

Investment professionals purchasing Class F Shares for their customers are
eligible to receive an advance payment from the distributor of 0.25% of the
purchase price.

Exchanging Securities for Shares

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.

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.

Account and Share Information

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote.

All Shares of the Corporation have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.

Directors 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 Corporation's outstanding
shares of all series entitled to vote.

As of December 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Class A Shares: MLPF&S,
Jacksonville, FL, owned approximately 6,180,207 shares (23.70%); and Edward
Jones & Co., Maryland Heights, MO, owned approximately 3,643,174 shares
(13.97%).

As of December 3, 1999, the following shareholder owned of record, beneficially,
or both, 5% or more of outstanding Class B Shares: MLPF&S, Jacksonville, FL,
owned approximately 3,358,839 shares (8.91%).

As of December 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Class C Shares: MLPF&S,
Jacksonville, FL, owned approximately 3,065,886 shares (30.74%); and Edward
Jones & Co., Maryland Heights, MO, owned approximately 579,043 shares (5.81%).

As of December 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Class F Shares: Nationwide
QPVA, Columbus, OH, owned approximately 6,598,282 shares (16.00%); MLPF&S,
Jacksonville, FL, owned approximately 4,228,777 shares (10.26%); and Parsch &
Co., Lapeer County Bank & Trust Co., Lapeer, MI, owned approximately 2,087,137
shares (5.06%).

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
Corporation'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 DIRECTORS

The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation'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
Corporation, principal occupations for the past five years and positions held
prior to the past five years, total compensation received as a Director from the
Corporation for its most recent fiscal year, and the total compensation received
from the Federated Fund Complex for the most recent calendar year. The
Corporation is comprised of one fund and the Federated Fund Complex is comprised
of 54 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.

As of December 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Class A, B, C, and F Shares.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Name
Total
Birth Date Aggregate
Compensation
Address Principal Occupations Compensation
From Corporation
Position With Corporation for Past Five Years From Corporation
and Fund Complex
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
<C>
John F. Donahue*+# Chief Executive Officer and Director or Trustee of the $0
$0 for the
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Director, Federated
Corporation and
Federated Investors Tower Investors, Inc.; Chairman and Trustee, Federated
54 other investment
1001 Liberty Avenue Investment Management Company; Chairman and Director,
companies
Pittsburgh, PA Federated Investment Counseling and Federated Global
in the Fund Complex
CHAIRMAN AND DIRECTOR Investment Management Corp.; Chairman, Passport
Research, Ltd.
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $1,610.55
$113,860.22 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's
Corporation and
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries,
54 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment);
companies
DIRECTOR formerly: Senior Partner, Ernst & Young LLP; Director,
in the Fund Complex
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 Complex; $1,771.86
$125,264.48 for the
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior
Corporation and
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc.,
54 other investment
Properties Corporation Realtors; Partner or Trustee in private real estate
companies
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
in the Fund Complex
Naples, FL Naples Property Management, Inc. and Northgate Village
DIRECTOR Development Corporation.
- -----------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Constantakis Director or Trustee of the Federated Fund Complex; $1,610.55
$47,958.02for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering,
Corporation and
175 Woodshire Drive construction, operations and technical services);
29 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC.
companies
DIRECTOR
in the Fund Complex
- -----------------------------------------------------------------------------------------------------------------------------------
John F. Cunningham Director or Trustee of some of the Federated Fund $1,226.07
$0 for the
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive
Corporation and
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business
46 other investment
Palm Beach, FL consulting); Trustee Associate, Boston College;
companies
DIRECTOR Director, Iperia Corp. (communications/software);
in the Fund Complex
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).

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 Complex; $1,610.55
$113,860.22 for the
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical
Corporation and
3471 Fifth Avenue Director, University of Pittsburgh Medical Center -
54 other investment
Suite 1111 Downtown; Hematologist, Oncologist, and Internist,
companies
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
in the Fund Complex
DIRECTOR National Board of Trustees, Leukemia Society of America.
- -----------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Director or Trustee of the Federated Fund Complex; $1,467.22
$113,860.22 for the
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts
Corporation and
One Royal Palm Way General Court; President, State Street Bank and Trust
54 other investment
100 Royal Palm Way Company and State Street Corporation.
companies
Palm Beach, FL
in the Fund Complex
DIRECTOR Previous Positions: Director, VISA USA and VISA
International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
- -----------------------------------------------------------------------------------------------------------------------------------
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $1,268.40
$0 for the
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External
Corporation and
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing,
50 other investment
Westhampton Beach, NY DIRECTOR communications, technology and consulting); formerly:
companies
Management Consultant.
in the Fund Complex

Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
- -----------------------------------------------------------------------------------------------------------------------------------
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $1,733.35
$113,860.22 for the
S.J.D.# President, Law Professor, Duquesne University;
Corporation
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael
and
President, Duquesne University Baker Corp. (engineering, construction, operations and
other investment
Pittsburgh, PA technical services).
companies
DIRECTOR
in the Fund Complex
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 Complex; $1,610.55
$113,860.22 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning.
Corporation and
4905 Bayard Street
54 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum
companies
DIRECTOR Company of America; television producer; business owner.
in the Fund Complex
- -----------------------------------------------------------------------------------------------------------------------------------
John S. Walsh Director or Trustee of some of the Federated Fund $1,226.07
$0 for the
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc.
Corporation and
2007 Sherwood Drive (manufacturer of construction temporary heaters);
48 other investment
Valparaiso, IN President and Director, Manufacturers Products, Inc.
companies
DIRECTOR (distributor of portable construction heaters);
in the Fund Complex
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue+* President or Executive Vice President of the Federated $0
$0 for the
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds
Corporation and
Federated Investors Tower in the Federated Fund Complex; President, Chief
16 other investment
1001 Liberty Avenue Executive Officer and Director, Federated Investors,
companies
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
in the Fund Complex
PRESIDENT AND DIRECTOR Management Company; President and Trustee, Federated
Investment Counseling; President and Director,
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
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice
Corporation and
Federated Investors Tower President and Treasurer of some of the Funds in the 1
other investment
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated
company
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
in the Fund Complex
EXECUTIVE VICE PRESIDENT 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 Federated $0
$0 for the
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and
Corporation and
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated
54 other investment
1001 Liberty Avenue Investment Management Company and Federated Investment
companies
Pittsburgh, PA Counseling; Director, Federated Global Investment in the Fund
Complex EXECUTIVE VICE PRESIDENT AND Management Corp, Federated Services Company
and SECRETARY Federated Securities Corp.
- -----------------------------------------------------------------------------------------------------------------------------------
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0
$0 for the
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated
Corporation and
Federated Investors Tower Investors, Inc.; formerly: various management positions
54 other investment
1001 Liberty Avenue within Funds Financial Services Division of Federated
companies
Pittsburgh, PA Investors, Inc.
in the Fund Complex
TREASURER
- -----------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President or Vice President of some of the Funds in the $0
$0 for the
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of
Corporation and
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice 6
other investment
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and
companies
Pittsburgh, PA Director, Federated Securities Corp.
in the Fund Complex
VICE PRESIDENT
- -----------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Chief Investment Officer of this Fund and various other $0
$0 for the
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice
Corporation and
Federated Investors Tower President, Federated Investment Counseling, Federated
41 other investment
1001 Liberty Avenue Global Investment Management Corp., Federated Investment
companies
Pittsburgh, PA Management Company and Passport Research, Ltd.;
in the Fund Complex
CHIEF INVESTMENT OFFICER 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 Portfolio $0
$0 for the
Birth Date: November 3, 1954 Manager since June 1992. He is Vice President of the
Corporation and
Federated Investors Tower Corporation. Mr. Balestrino joined Federated in 1986 and 3
other investment
1001 Liberty Avenue has been a Senior Portfolio Manager and Senior Vice
companies
Pittsburgh, PA President of the Fund's Adviser since 1998. He was a
in the Fund Complex
VICE PRESIDENT 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.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* An asterisk denotes a Director 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.
+ Mr. Donahue is the father of J. Christopher Donahue, President and Director
of the Corporation.
++Messrs. Cunningham, Mansfield and Walsh became members of the Board of
Directors on January 1, 1999. They did not earn any fees for serving the Fund
Complex since these fees are reported as of the end of the last calendar year.

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 Corporation 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 Corporation.

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. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). 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

Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.

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:

<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
<S> <C>
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
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated 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 PUBLIC ACCOUNTANTs

The independent public accountant for the Fund, Deloitte & Touche 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 October 31,
<TABLE>
<CAPTION>
1999
1998 1997
<S> <C>
<C> <C>
Advisory Fee Earned $8,043,846
$6,185,961 $4,127,217
Advisory Fee Reduction $1,188,200 $
855,524 $ 842,462
Brokerage Commissions $ 0 $
0 $ 0
Administrative Fee $ 808,675 $
621,951 $ 415,495
12b-1 Fee
Class A Shares $ 0
- -- --
Class B Shares $2,563,851
- -- --
Class C Shares $ 685,661
- -- --
Shareholder Services Fee
Class A Shares $ 483,966
- -- --
Class B Shares $ 854,617
- -- --
Class C Shares $ 228,554
- -- --
Class F Shares $ 913,703
- -- --
</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.

Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
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 are given for the one-year, five-year, ten-year or Start of
Performance periods ended October 31, 1999.

Yields are given for the 30-day period ended October 31, 1999.

<TABLE>
<CAPTION>
Start of
Performance
30-Day Period 1 Year on June 28,
1995
<S> <C> <C> <C>
Class A Shares
Total Return NA (4.81%) 4.98%
Yield 7.11% NA NA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Start of
Performance
30-Day Period 1 Year on June 28,
1995
<S> <C> <C> <C>
Class B Shares
Total Return NA (6.21%) 4.92%
Yield 6.63% NA NA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Start of
Performance
30-Day Period 1 Year on June 28,
1995
<S> <C> <C> <C>
Class C Shares
Total Return NA (2.04%) 5.29%
Yield 6.64% NA NA
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
30-Day Period 1 Year 5
Years 10 Years
<S> <C> <C>
<C> <C>
Class F Shares
Total Return NA (2.28%)
7.47% 9.18%
Yield 7.42% 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 Fund; 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:

Lehman Brothers High Yield Index. Covers the universe of fixed rate, publicly
issued, non-investment grade debt registered with the SEC. All bonds included in
the High Yield Index must be dollar-denominated and nonconvertible and have at
least one year remaining to maturity and an outstanding par value of at least
$100 million. Generally securities must be rated Ba1 or lower by Moody's
Investors Service, including defaulted issues. If no Moody's rating is
available, bonds must be rated BB+ or lower by S&P; and if no S&P rating is
available, bonds must be rated below investment grade by Fitch IBCA, Inc. A
small number of unrated bonds is included in the index; to be eligible they must
have previously held a high yield rating or have been associated with a high
yield issuer, and must trade accordingly.

Lipper Analytical Services, Inc. Ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specified period of time.

Lehman Brothers Government/Corporate (Total) Index is comprised of approximately
5,000 issues which include: non-convertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed rate, non-convertible
domestic bonds of companies in industry, public utilities, and finance. The
average maturity of these bonds approximates nine years. Tracked by Lehman
Brothers, Inc., the index calculates total returns for one-month, three-month,
twelve-month, and ten-year periods and year-to-date.

Salomon Brothers Aaa-Aa Corporates Index calculates total returns of
approximately 775 issues which include long-term, high grade domestic corporate
taxable bonds, rated AAA-AA with maturities of twelve years or more and
companies in industry, public utilities, and finance.

Merrill Lynch Corporate & Government Master Index is an unmanaged index
comprised of approximately 4,821 issues which include corporate debt obligations
rated BBB or better and publicly issued, non-convertible domestic debt of the
U.S. government or any agency thereof. These quality parameters are based on
composites of ratings assigned by Standard and Poor's Ratings Group and Moody's
Investors Service, Inc. Only notes and bonds with a minimum maturity of one year
are included.

Merrill Lynch Corporate Master is an unmanaged index comprised of approximately
4,356 corporate debt obligations rated BBB or better. These quality parameters
are based on composites of ratings assigned by Standard and Poor's Corporation
and Moody's Investors Service, Inc. Only bonds with a minimum maturity of one
year are included.

The Lehman Brothers Corporate Bond Index 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
Ratings Group or, in the case of bank bonds not rated by either of the
previously mentioned services, BBB by Fitch Investors Service, 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.

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 managed 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 October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
Federated Bond Fund dated October 31, 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 BOND FUND

Class A Shares
Class B Shares
Class C Shares
Class F 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 Public Accountants

Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116

PART C. OTHER INFORMATION.

Item 23.
(a) Copy of Articles of Incorporation of the Registrant;
(1) (i) Conformed copy of Articles Supplementary,
dated
July 1, 1993; (12)
(ii) Conformed copy of Articles Supplementary, dated
May 20, 1994; (12)
(iii)Conformed copy of Articles Supplementary, dated
May 18, 1995; (12)
(iv) Conformed copy of Articles of Amendment, dated
March 29, 1996; (12)
(v) Conformed copy of Articles Supplementary, dated
November 15, 1996; (12)
(vi) Conformed copy of Certificate of Correction,
dated February 28, 1997; (12)
(vii)Conformed copy of Certificate of Correction,
dated February 28, 1997; (12)
(b) Copy of By-Laws of the Registrant; (1)
(i) Copy of Amendment No.1 to the By-Laws of
Registrant; (11)
(ii) Copy of Amendment No.2 to the By-Laws of
Registrant; (11)
(iii)Copy of Amendment No.3 to the By-Laws of
Registrant; (11)
(c) (i) Copies of Specimen Certificates for Shares of
Capital Stock of Federated Bond
Fund; (5)
(ii) Copy of Specimen Certificate for Shares of
Common Stock of Class F Shares of
Federated Bond Fund; (7)
(d) Conformed copy of Investment Advisory Contract of the
Registrant; (3) (e) (i) Copy of Distributor's Contract of
Registrant; (2)
(a) Conformed copy of Exhibits C and D
to Distributor's Contract; (4) (b)
Conformed copy of Exhibits E, F, and G
to Distributor's Contract;
(5)
(ii) Conformed copy of Distributor's Contract
(Class B Shares) including Exhibit 1 and
Schedule A; (10)
(iii) The Registrant hereby incorporates the
conformed copy of the specimen Mutual
Funds Sales and Service Agreement;
Mutual Funds Service Agreement; and Plan
Trustee/Mutual Funds Service Agreement
from Item 24(b)(6) of the Cash Trust
Series II Registration Statement on Form
N-1A, filed with the Commission on July
24, 1995. (File Nos. 33-38550 and
811-6269);
(f) Not applicable;

+ All exhibits have been filed electronically via EDGAR.

(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed August 21, 1992. (File No. 33-48847)

(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed September 8, 1992. (File No. 33-48847)

(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed December 29, 1993 (File No. 33-48847)

(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed December 23, 1994 (File No. 33-48847)

(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed July 27, 1995 (File No. 33-48847)

(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed February 18, 1997 (File No. 33-48847)

(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed December 31, 1997 (File No. 33-48847)

(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed October 30, 1998 (File No. 33-48847)

(12) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed October 29, 1999 (File No. 33-48847)

<PAGE>

(g) (i) Conformed copy of Custodian Agreement of the
Registrant;(3) (ii) Conformed copy of State Street
Domestic Custody Fee Schedule; (9)
(h) (i) Conformed copy of Principal Shareholder
Servicer's Agreement (Class B Shares)
including Exhibit 1 and Schedule A; (10)
(ii) Conformed copy of Shareholder Services
Agreement (Class B Shares) including Exhibit
1 and Schedule A; (10)
(iii) Amended and Restated Agreement for Fund
Accounting Services, Administrative
Services, Transfer Agency Services, and
Custody Services Procurement; (11)
(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 the Federated
GNMA Trust Registration Statement on Form
N-1A, filed with the Commission on March 25,
1996 (File Nos.
2-75670 and 811-3375);
(v) Conformed copy of Amended and Restated
Shareholder Services Agreement; (9) (vi) The
responses described in Item 24(b)(6)(ii) are hereby
incorporated by
reference;
(i) Copy of Opinion and Consent of Counsel as to legality of
shares being registered; (2) (j) Conformed copy of Consent
of Independent Auditors; (+) (k) Not applicable; (l) Not
applicable; (m) (i) Copy of Distribution Plan; (2)
(ii) Conformed Copy of Exhibits B and C to
Distribution Plan; (4) (iii) Conformed Copy of
Exhibits D, E, and F to Distribution Plan; (5) (iv)
Conformed copy of Exhibit 1 to the 12b-1 Distribution
Plan (Class B Shares) of
the Registrant; (10)

(v) The responses described in Item 24(b)(6)(ii) are hereby
incorporated by reference;

+ All exhibits have been filed electronically via EDGAR.

(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed September 8, 1992. (File No. 33-48847)

(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed December 29, 1993 (File No. 33-48847)

(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed December 23, 1994 (File No. 33-48847)

(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed July 27, 1995 (File No. 33-48847)

(9) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed October 24, 1997 (File No. 33-48847)

10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed December 31, 1997 (File No. 33-48847)

11) Response is incorporated by reference to Registrant's Post- Effective
Amendment No. 16 on Form N-1A filed October 30, 1998 (File No. 33-48847)

<PAGE>

(n) The Registrant hereby incorporates the conformed copy
of the 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; (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
John F. Cunningham; (12)
(iv) Conformed Copy of Power of Attorney of Trustee
Charles F. Mansfield, Jr.; (12)
(v) Conformed Copy of Power of Attorney of Trustee
John S. Walsh. (12)

Item 24. Persons Controlled by or Under Common Control with Fund:

None

Item 25. Indemnification: (1)

+ All exhibits have been filed electronically via EDGAR.

(1) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed September 8, 1992. (File No. 33-48847)

(12) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed October 29, 1999 (File No. 33-48847)

<PAGE>

Item 26. Business and Other Connections of 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.

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
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
Alexandre de Bethmann
Anthony Delserone, Jr.
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
James E. Grefenstette
Marc Halperin
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
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
Edward J. Tiedge
Leonardo A. Vila
Paige M. Wilhelm
George B. Wright

<PAGE>

Assistant Vice Presidents: Arminda Aviles
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
Christopher Matyszewski
Natalie F. Metz
Thomas Mitchell
Joseph M. Natoli
Trent Nevills
Ihab Salib
Roberto Sanchez-Dahl, Sr.
James W. Schaub
John Sheehy
John Sidawi
Matthew K. Stapen
Diane Tolby
Timothy G. Trebilcock
Steven J. Wagner
Lori A. Wolff

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Secretaries: C. Grant Anderson
Karen M. Brownlee
Leslie K. Ross

Assistant Treasurer: Dennis McAuley, III

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; and Trust for Financial Institutions.

Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.

<PAGE>

(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
Pittsburgh, PA 15222-3779 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 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

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

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

Ronald M. Petnuch 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

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

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

Bruce E. Hastings 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

Dennis M. Laffey 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

Amy Michalisyn 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

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peter 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

Larry Sebbens 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

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

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

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Donald C. Edwards 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

Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Victor R. Siclari Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley III Assistant Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

</TABLE>

<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:

<S> <C>

Registrant Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Notices should be sent to the Agent for Service at 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 Federated Investors Tower
Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779

State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600
</TABLE>

Item 29. Management Services: Not applicable.

Item 30. Undertakings:

Registrant hereby undertakes, if requested to do so by the holders
of at least 10% of the registrant's outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the
question of removal of a Director or Directors and to assist in
communications with other shareholders as required by Section
16(c).

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, INVESTMENT SERIES FUNDS,
INC., certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
29th day of December, 1999.

INVESTMENT SERIES FUNDS, INC.

BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
December 29, 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 December 29, 1999
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

John F. Donahue* Chairman and Director
(Chief Executive Officer)

J. Christopher Donahue* President and Director

Richard J. Thomas* Treasurer
(Principal Financial and
Accounting Officer)

William D. Dawson, III* Chief Investment Officer

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

Nicholas P. Constantakis* Director

John F. Cunningham* Director

Lawrence D. Ellis, M.D.* Director

Peter E. Madden* Director

Charles F. Mansfield, Jr.* Director

John E. Murray, Jr.* Director

Marjorie P. Smuts* Director

John S. Walsh* Director

*By Power of Attorney

</TABLE>

Exhibit (j) under Form N-1A
Exhibit 23 under Item 601/Reg SK

INDEPENDENT AUDITORS' CONSENT

To the Directors of Investment Series Funds, Inc. and the Shareholders
of Federated Bond Fund:

We consent to the use in Post-Effective Amendment No. 19 to Registration
Statement 33-48847 of Federated Bond Fund of our report dated December 17, 1999
appearing in the Prospectus, which is a part of such Registration Statement, and
to the reference to us under the heading "Financial Highlights" in such
Prospectus.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
December 28, 1999