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INVESTMENT SERIES FUNDS, INC.
Federated Bond Fund
Supplement to Prospectus Dated December 31, 1998
I. At a special meeting of shareholders to be held on November 30, 1999,
shareholders of the above-named Fund will be asked to vote on the
changes described below. If approved by shareholders, these changes
will take effect on or after December 1, 1999. Shareholders will be
notified if any of these changes are not approved at the special
meeting or any adjournment thereof. Please keep this supplement for
your records.
Shareholders will be asked to consider the following proposals:
(1) To elect three Directors.
(2) To make changes to the fundamental investment policies of the Fund:
(a) To amend the Fund's fundamental investment policy
regarding borrowing money and issuing senior
securities to read as follows:
"The Fund may borrow money, directly or indirectly,
and issue senior securities to the maximum extent
permitted under the 1940 Act."
(b) To amend the Fund's fundamental investment policy
regarding investments in real estate to read as
follows:
"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
interests 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."
(c) To amend the Fund's fundamental investment policy
regarding investments in commodities to read as
follows:
"The Fund may not purchase or sell physical
commodities, provided that the Fund may purchase
securities of companies that deal in commodities."
(d) To amend the Fund's fundamental investment policy
regarding underwriting securities to read as follows:
"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."
(e) To amend the Fund's fundamental investment policy
regarding lending by the Fund to read as follows:
"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."
(f) To amend the Fund's fundamental investment policy
regarding concentration of the Fund's investments in
the securities of companies in the same industry to
read as follows:
"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."
(g) To amend, and to make non-fundamental, the Fund's
fundamental investment policy regarding buying
securities on margin to read as follows:
"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."
(h) To amend, and to make non-fundamental, the Fund's
fundamental investment policy regarding pledging
assets to read as follows:
"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."
(3) To eliminate the Fund's fundamental investment policy regarding
selling securities short.
(4) To approve amendments to, and a restatement of, the Articles
of Incorporation for Investment Series Funds, Inc. (the
"Company"):
(a) To require the approval of a "1940 Act" majority of
shareholders in the event of the sale or conveyance
of the assets of the Company to another corporation
or trust, to the extent permitted under Maryland law;
and
(b) To permit the Board of Directors to liquidate assets
of the Company, or of a series or class, and
distribute the proceeds of such assets to the holders
of such shares representing such interests, without
seeking shareholder approval, to the extent permitted
under Maryland law.
II. The following actions have been taken by the Board of Directors with
regard to certain non-fundamental investment policies and limitations
of the Fund:
(1) Approved the elimination of the Fund's non-fundamental
investment policy regarding writing call options and
purchasing put options.
(2) Approved the elimination of the following undertakings for the
Fund:
"The Fund has no present intent to borrow money, sell
securities short, engage in foreign currency options, or
purchase financial futures contracts in excess of 5% of the
value of its net assets during the coming fiscal year."
(3) Approved the adoption of the following non-fundamental
investment limitations pertaining to concentration by the
Fund:
"(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.'"
(4) Approved the adoption of the following non-fundamental
investment limitation for the Fund when applying its
commodities restriction:
"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."
(5) Approved the adoption of the following non-fundamental
investment limitation for the Fund regarding 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."
III. The Board of Directors approved the following restatement of the Fund's
fundamental investment policy regarding diversification, without
changing the meaning of the policy:
"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 the Fund would own more than 10%
of the outstanding voting securities of that issuer."
October 12, 1999
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Cusip 461444309
Cusip 461444507
Cusip 461444606
Cusip 461444705
G02739-02 (10/99)
