WORLD INVESTMENT SERIES INC, 497, 1994-04-20

WORLD INVESTMENT SERIES INC
497, 1994-04-20

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WORLD UTILITY FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
PROSPECTUS

The Class A Shares of World Utility Fund (the "Fund") offered by this prospectus
represent interests in the Fund, which is a diversified investment portfolio in
World Investment Series, Inc. (the "Corporation"), an open-end, management
investment company (a mutual fund).

The Fund's investment objective is to provide total return. The Fund invests
primarily in securities issued by domestic and foreign companies in the
utilities industries.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENTS RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

The Fund has also filed a Combined Statement of Additional Information for Class
A Shares and Fortress Shares dated April 15, 1994, with the Securities and
Exchange Commission. The information contained in the Combined Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Combined Statement of Additional Information free of
charge by calling 1-800-235-4669. To obtain other information or make inquiries
about the Fund, contact your financial institution.

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

Prospectus dated April 15, 1994

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

LIBERTY FAMILY OF FUNDS 2
- ------------------------------------------------------

INVESTMENT INFORMATION 3
- ------------------------------------------------------

Investment Objective 3
Investment Policies 3

Risk Factors and Investment Considerations 5

Considerations of Utility Securities 5
Electric 6
Telecommunications 6
Gas 6
Water 6
Exchange Rates 6
Foreign Companies 7
U.S. Government Policies 7
Other Investment Practices 7
Foreign Currency Transactions 7
Forward Foreign Currency Exchange
Contracts 7
Repurchase Agreements 8
Lending of Portfolio Securities 8
Restricted and Illiquid Securities 8
When-Issued and Delayed Delivery
Transactions 8
Covered Call Options 8
Investment Limitations 9

NET ASSET VALUE 9
- ------------------------------------------------------

INVESTING IN CLASS A SHARES 9
- ------------------------------------------------------

Share Purchases 9
Through a Financial Institution 9
Directly by Mail 10
Directly by Wire 10
Minimum Investment Required 10
What Shares Cost 10
Dealer Concession 11
Reducing or Eliminating the Sales Charge 11
Quantity Discounts and Accumulated
Purchases 11
Letter of Intent 12
Reinvestment Privilege 12
Purchases with Proceeds from Redemptions
of Unaffiliated Mutual Fund Shares 12
Concurrent Purchases 12
Systematic Investment Program 12
Exchanging Securities for Fund Shares 13
Certificates and Confirmations 13
Dividends and Distributions 13
Retirement Plans 13

EXCHANGE PRIVILEGE 13
- ------------------------------------------------------

Reduced Sales Charge 14
Requirements for Exchange 14
Tax Consequences 14
Making an Exchange 14
Telephone Instructions 14

REDEEMING CLASS A SHARES 15
- ------------------------------------------------------

Through a Financial Institution 15
Directly from the Fund 15
By Telephone 15
By Mail 15

Signatures 16

Systematic Withdrawal Program 16
Accounts with Low Balances 16

WORLD INVESTMENT SERIES, INC. INFORMATION 17
- ------------------------------------------------------

Management of the Corporation 17
Board of Directors 17
Officers and Directors 17
Investment Adviser 20
Advisory Fees 21
Adviser's Background 21
Distribution of Class A Shares 21
Other Payments to Financial Institutions 21
Administration of the Fund 21
Administrative Services 21
Shareholder Services Plan 22
Custodian 22
Transfer Agent and Dividend
Disbursing Agent 22
Legal Counsel 22
Independent Auditors 23
Brokerage Transactions 23
Expenses of the Fund and Class A Shares 23

SHAREHOLDER INFORMATION 23
- ------------------------------------------------------

Voting Rights 23

TAX INFORMATION 24
- ------------------------------------------------------

Federal Income Tax 24
Pennsylvania Corporate and
Personal Property Taxes 25

OTHER CLASSES OF SHARES 25
- ------------------------------------------------------

PERFORMANCE INFORMATION 25
- ------------------------------------------------------

STATEMENT OF ASSETS AND LIABILITIES 26
- ------------------------------------------------------

REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS 27

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

ADDRESSES Inside Back Cover
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).............. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds as applicable)..................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....................... None
Exchange Fee............................................................................. None
ANNUAL CLASS A SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)......................................................... 0.39%
12b-1 Fee................................................................................ None
Total Other Expenses..................................................................... 0.60%
Shareholder Servicing Fee....................................................... 0.25%
Total Class A Shares Operating Expenses(2)........................................... 0.99%
</TABLE>

(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can terminate
this voluntary waiver at any time at its sole discretion. The maximum management
fee is 1.00%.

(2) The Total Class A Shares Operating Expenses are estimated to be 1.60% absent
the anticipated voluntary waiver of a portion of the management fee.

* TOTAL CLASS A SHARES OPERATING EXPENSES ARE ESTIMATED BASED ON AVERAGE
EXPENSES EXPECTED TO BE INCURRED DURING THE PERIOD ENDING NOVEMBER 30, 1994.
DURING THE COURSE OF THIS PERIOD, EXPENSES MAY BE MORE OR LESS THAN THE
AVERAGE AMOUNT SHOWN.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS A SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN CLASS A SHARES" AND "WORLD
INVESTMENT SERIES, INC. INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN
$5,000 MAY BE SUBJECT TO ADDITIONAL FEES.

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.............. $ 55 $75
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1994.

The information set forth in the foregoing table and example relates only to
Class A Shares of the Fund. The Fund also offers another class of shares called
Fortress Shares. Class A Shares and Fortress Shares are subject to certain of
the same expenses; however, Fortress Shares are subject to a maximum sales load
of 1.00%, a contingent deferred sales charge of 1.00%, and a 12b-1 fee of 0.25%.
See "Other Classes of Shares."

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Corporation was established as a corporation under the laws of the state of
Maryland on January 25, 1994. The Corporation's address is Liberty Center,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of
Incorporation permit the Corporation to offer separate series of shares
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. With respect to this Fund, as
of the date of this prospectus, the Board of Directors ("Directors") have
established two classes of shares, known as Class A Shares and Fortress Shares.
This prospectus relates only to Class A Shares ("Shares") of the Corporation's
portfolio known as World Utility Fund.

Shares of the Fund are designed to give institutions and individuals a
convenient means of seeking total return without undue risk through a
professionally managed, diversified portfolio comprised primarily of foreign and
domestic utility securities. The Fund is not intended to provide a complete
investment program for an investor. A minimum initial investment of $500 is
required, unless the investment is in a retirement account, in which case the
minimum investment is $50.

In general, Shares are sold at net asset value plus an applicable sales charge
and are redeemed at net asset value. However, a contingent deferred sales charge
is imposed on certain Shares. For a more complete description, see "Redeeming
Class A Shares."

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

LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------

This class of shares is a member of a family of mutual funds, collectively known
as the Liberty Family of Funds. The other funds in the Liberty Family of Funds
are:

AMERICAN LEADERS FUND, INC., providing growth of capital and income through
high quality stocks;

CAPITAL GROWTH FUND ( LIBERTY SHARES ONLY), providing appreciation of
capital primarily through equity securities;

FUND FOR U.S. GOVERNMENT SECURITIES, INC., providing current income through
long-term U.S. government securities;

INTERNATIONAL EQUITY FUND, providing long-term capital growth and income
through international securities;

INTERNATIONAL INCOME FUND, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;

LIBERTY EQUITY INCOME FUND, INC., an equity fund investing primarily in
stocks which have a history of regular dividends;

LIBERTY HIGH INCOME BOND FUND, INC., providing high current income through
high-yielding, lower-rated, corporate bonds;

LIBERTY MUNICIPAL SECURITIES FUND, INC., providing a high level of current
income exempt from federal regular income tax through municipal bonds;

LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST, providing current income
consistent with stability of principal through high-quality U.S. government
securities;

LIBERTY UTILITY FUND, INC., providing current income and long-term growth
of income, primarily through electric, gas, and communication utilities;
and

TAX-FREE INSTRUMENTS TRUST, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities.

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

Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.

The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of proven, professional investment advisers.

Shareholders of Class A Shares participating in the Liberty Account are
designated as Liberty Life Members. Liberty Life Members are exempt from sales
charges on future purchases in and exchanges between the Class A Shares of any
funds in the Liberty Family of Funds, as long as they maintain a $500 balance in
one of the Liberty Funds.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide total return. The investment
objective may be changed by the Directors without the approval of shareholders.
Shareholders will be notified in writing at least 30 days prior to any change in
the investment objective. Any such change may result in the Fund having an
investment objective different from the investment objective which a shareholder
considered appropriate at the time of investment in the Fund. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the policies described in this prospectus. Unless indicated
otherwise, the policies may be changed by the Directors without the approval of
shareholders. Shareholders will be notified before any material changes in these
policies become effective.

INVESTMENT POLICIES

The Fund will seek to achieve its investment objective by investing at least 65%
of its total assets in securities issued by domestic and foreign companies in
the utilities industries. For these purposes, companies will be considered to be
in the utilities industries if, in the opinion of Federated Management ("the
Investment Adviser"), they are primarily engaged in the ownership or operation
of facilities used to generate, transmit, or distribute electricity, telephone
communications, cable and other pay television services, radio-telephone
communications, gas, or water.

The Fund's portfolio will at all times include issuers located in at least three
countries, although the Investment Adviser expects to invest in more than three
countries. It is expected that, under normal circumstances, the assets of the
Fund invested in U.S. securities will be higher than that invested in securities
of any other single country. At times, the Fund may have more than 65% of its
total assets invested in foreign securities.

The Fund may invest up to 35% of its total assets in securities of issuers that
are outside the utilities industries. Such investments may consist of common
stocks, debt securities, preferred stocks, or other securities issued by either
U.S. or foreign companies, governments, or governmental instrumentalities. Some
of these issuers may be in industries related to the utilities industries and,
therefore, may be subject to similar considerations. The prices of fixed income
securities fluctuate inversely in relation to the direction of interest rates.
The prices of longer term bonds fluctuate more widely in response to market
interest rate changes.

Debt obligations in the portfolio, at the time they are purchased, generally
will be limited to those which fall in one of the following categories: (i)
rated BBB or better by Standard & Poor's Corporation or Baa by Moody's Investors
Service, Inc., or (ii) determined by the Investment Adviser to be of investment
grade and not rated by either of the aforementioned rating services. However,
the Fund may invest up to 35% of the value of its total assets in lower-rated
convertible and non-convertible debt obligations that are not investment grade
bonds, but are rated CCC or better by Standard & Poor's Corporation or Caa or
better by Moody's Investors Service, Inc., or are not rated but are determined
by the Fund's investment adviser to be of comparable quality. Securities rated
BB, B and, CCC by Standard & Poor's Corporation or Ba, B, and Caa by Moody's
Investors Service, Inc. either have speculative characteristics or are
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations. Debt obligations that
are not determined to be investment grade are high-yield high-risk bonds,
typically subject to greater market fluctuations, and securities in the lowest
rating category may be in danger of loss of income and principal due to an
issuer's default. To a greater extent than investment grade bonds, the value of
lower-rated bonds tends to reflect short-term corporate, economic and market
developments, as well as investor perceptions of the issuer's credit quality. In
addition, lower rated bonds may be more difficult to dispose of or to value than
high-rated, lower-yielding bonds. The Investment Adviser attempts to reduce the
risks described above through diversification of the portfolio and by credit
analysis of each issuer as well as by monitoring broad economic trends and
corporate and legislative developments. In the event the rating on an issue held
in the Fund's portfolio is changed by the ratings services (or, for an unrated
issue, in the determination of the Investment Adviser), such event will be
considered by the Investment Adviser in its evaluation of the overall investment
merits of that security, but will not necessarily result in the automatic sale
of the security. A description of the rating categories is contained in the
Appendix to the Combined Statement of Additional Information.

For temporary defensive purposes and to maintain liquidity in anticipation of
favorable investment opportunities, the Fund may invest in short-term money
market instruments including securities of other investment companies,
certificates of deposit, obligations issued or guaranteed by the United States
government or its agencies or instrumentalities, commercial paper rated not
lower than A-1 by Standard & Poor's Corporation, Prime-1 by Moody's Investors
Service, Inc. or repurchase agreements.

RISK FACTORS AND INVESTMENT CONSIDERATIONS

The Fund will attempt to meet its investment objective by being at least 65%
invested in securities issued by companies in the domestic and foreign utilities
industries. There exist certain risks associated with the utilities industries
and with foreign securities of which investors in the Fund should be aware.

CONSIDERATIONS OF UTILITY SECURITIES. There are certain risks and
considerations affecting utility companies, and the holders of utility company
securities, which an investor should take into account when investing in those
securities. Factors which may adversely affect utility companies include:
difficulty in financing large construction programs during inflationary periods;
technological innovations which may cause existing plants, equipment, or
products to become less competitive or obsolete; the impact of natural or
man-made disasters (especially on regional utilities); increased costs or
reductions in production due to the unavailability of appropriate types of fuel;
seasonally or occasionally reduced availability or higher cost of natural gas;
and reduced demand due to energy conservation among consumers. Furthermore, the
revenues of domestic and foreign utility companies generally reflect the
economic growth and developments in the geographic areas in which they do
business.

In addition, most utility companies in the United States and in foreign
countries are subject to government regulation. Generally, the purpose of such
regulation is to ensure desirable levels of service and adequate capacity to
meet public demand. To this end, prices are often regulated to enable consumers
to obtain service at what is perceived to be a fair price, while attempting to
provide utility companies with a rate of return sufficient to attract capital
investment necessary for continued operation and necessary growth. Recently,
utility regulators have permitted utilities to diversify outside of their
original geographic regions and their traditional lines of business. While the
Investment Adviser believes that these opportunities will permit certain utility
companies to earn more than their traditional regulated rates of return, other
companies may be forced to defend their core businesses and may be less
profitable. Of course, there can be no assurance that all of the regulatory
policies described in this paragraph will continue in the future.

In addition to the effects of regulation described in the previous paragraph,
utility companies may also be adversely affected by the following regulatory
considerations: the development and implementation of a national energy policy;
the differences between regulatory policies of different jurisdictions (or
different regulators which have concurrent jurisdiction); shifts in regulatory
policies; adequacy of rate increases; and future regulatory legislation.

Foreign utility companies may encounter different risks and opportunities than
those located in the United States. Foreign utility companies may be more
heavily regulated than their United States counterparts. Many foreign utility
companies currently use fuels which cause more pollution than fuels used by
United States utilities; in the future, it may be necessary for such foreign
utility companies to invest heavily in pollution control equipment or otherwise
meet pollution restrictions. Rapid growth in certain foreign economies may
encourage the growth of utility industries in those countries. Although many
foreign utility companies are currently government-owned, the Investment Adviser
believes that it is likely that some foreign governments will seek to
"privatize" their utility companies, i.e., transfer ownership to private
investors.

In addition to the foregoing considerations which affect most utility companies,
there are specific considerations which affect specific utility industries:

ELECTRIC. The electric utility industry is made up of companies that are
engaged in the generation, transmission, and sale of electric energy.
Domestic electric utility companies have generally been favorably affected
by lower fuel and financing costs and the completion of major construction
programs. Some electric utilities are able to sell power outside of their
traditional geographic areas. Electric utility companies have historically
been subject to increases in fuel and other operating costs, high interest
costs on borrowings needed for capital construction programs, compliance
with environmental and safety regulations, and changes in the regulatory
climate.

In the United States, the construction and operation of nuclear power
facilities is subject to a high degree of regulatory oversight by the
Nuclear Regulatory Commission and state agencies with concurrent
jurisdiction. In addition, the design, construction, licensing, and
operation of nuclear power facilities have been subject to lengthy delays
and unanticipated costs due to changes in regulatory policy, regional
political actions, and lawsuits. Furthermore, during rate authorizations,
utility regulators may disallow the inclusion in electric rates of the
higher operating costs and capital expenditures resulting from these delays
and unanticipated costs, including the costs of a nuclear facility which a
utility company may never be able to use.

TELECOMMUNICATIONS. The telephone industry is large and highly
concentrated. The greatest portion of this segment is comprised of
companies which distribute telephone services and provide access to the
telephone networks. While many telephone utility companies have diversified
into other businesses in recent years, the profitability of telephone
utility companies could be adversely affected by increasing competition,
technological innovations, and other structural changes in the industry.
Cable television companies are typically local monopolies, subject to
scrutiny by both utility regulators and municipal governments. Emerging
technologies and legislation encouraging local competition are combining to
threaten these monopolies and may slow future growth rates of these
companies. The radio telecommunications segment of this industry, including
cellular telephone, is in its early developmental phases and is
characterized by emerging, rapidly growing companies.

GAS. Gas transmission and distribution companies are undergoing
significant changes. In the United States, the Federal Energy Regulatory
Commission is reducing its regulation of interstate transmission of gas.
While gas utility companies have in the recent past been adversely affected
by disruptions in the oil industry, increased concentration, and increased
competition, the Investment Adviser believes that environmental
considerations should benefit the gas industry in the future.

WATER. Water utility companies purify, distribute, and sell water. This
industry is highly fragmented because most of the water supplies are owned
by local authorities. Water utility companies are generally mature and are
experiencing little or no per capita volume growth. The Investment Adviser
believes that favorable investment opportunities may result if anticipated
consolidation and foreign participation in this industry occur.

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

EXCHANGE RATES. Foreign securities are denominated in foreign currencies.
Therefore, the value in U.S. dollars of the Fund's assets and income may be
affected by changes in exchange rates and

regulations. Although the Fund values its assets daily in U.S. dollars, it will
not convert its holding of foreign currencies to U.S. dollars daily. When the
Fund converts its holdings to another currency, it may incur conversion costs.
Foreign exchange dealers realize a profit on the difference between the prices
at which they buy and sell currencies.

FOREIGN COMPANIES. Other differences between investing in foreign and U.S.
companies include: less publicly available information about foreign companies;
the lack of uniform financial accounting standards applicable to foreign
companies; less readily available market quotations on foreign companies;
differences in government regulation and supervision of foreign stock exchanges,
brokers, listed companies, and banks; generally lower foreign stock market
volume; the likelihood that foreign securities may be less liquid or more
volatile; foreign brokerage commissions may be higher; unreliable mail service
between countries; political or financial changes which adversely affect
investments in some countries; and difficulties which may be encountered in
obtaining or enforcing a court judgment abroad.

U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as the
Fund. Although the Fund is unaware of any current restrictions, investors are
advised that these policies could be reinstituted.

OTHER INVESTMENT PRACTICES

FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts.

The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency transactions may be used by the Fund to protect against a
decline in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract ("forward contract") is an obligation to purchase or sell an
amount of a particular currency at a specific price and on a future date agreed
upon by the parties.

Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated on the Fund's records and
are maintained until the contract has been settled. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between trade date and settlement date will vary between twenty-four
hours and thirty days, depending upon local custom.

The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market

movements and of precisely matching forward contract amounts and the constantly
changing value of the securities involved. Although the Investment Adviser will
consider the likelihood of changes in currency values when making investment
decisions, the Investment Adviser believes that it is important to be able to
enter into forward contracts when it believes the interests of the Fund will be
served. The Fund will not enter into forward contracts for hedging purposes in a
particular currency in an amount in excess of the Fund's assets denominated in
that currency. No more than 30% of the Fund's assets will be committed to
forward contracts for hedging purposes at any time. (This restriction does not
include forward contracts entered into to settle securities transactions.)

REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will limit the amount of
portfolio securities it may lend to not more than one-third of its total assets.
The Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the Investment Adviser has determined are creditworthy
under guidelines established by the Fund's Board of Directors and will receive
collateral in cash or United States government securities that will be
maintained in an amount equal to at least 100% of the current market value of
the securities loaned.

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restriction on resale under federal securities law. To the extent
these securities are deemed to be illiquid, the Fund will limit its purchases
together with other securities considered to be illiquid to 15% of its net
assets.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure may cause the Fund to miss a price or yield considered to be
advantageous.

COVERED CALL OPTIONS. The Fund may also write call options on all or any
portion of its portfolio to generate income for the Fund. Call options written
by the Fund give the holder the right to buy the underlying securities of the
Fund at the stated exercise price. The Fund will write call options only on
securities either held in its portfolio or for which it has the right to obtain
without payment of further consideration or for which it has segregated cash in
the amount of any additional consideration. The call options which the Fund
writes and sells must be listed on a recognized options exchange. The Fund's
investment in call options shall not exceed 5% of the Fund's total assets.

INVESTMENT LIMITATIONS

The Fund will not:

- with respect to 75% of its total assets, invest more than 5% of its total
assets in the securities of any one issuer, except that this restriction
does not apply to cash and cash items, repurchase agreements, and
securities issued or guaranteed by the United States government or its
agencies or instrumentalities, or acquire more than 10% of the
outstanding voting securities of any one issuer;

- borrow money, issue senior securities, or pledge assets, except that
under certain circumstances the Fund may borrow money and engage in
reverse repurchase transactions in amounts up to one-third of the value
of its total assets, including the amounts borrowed, and pledge up to 10%
of the value of those assets to secure such borrowings.

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

The Fund will not invest more than 25% of its total assets in securities of
companies engaged principally in any one industry other than the utilities
industry, except that this restriction does not apply to cash or cash items and
securities issued or guaranteed by the United States government or its agencies
or instrumentalities.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class A Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class A Shares in the liabilities of the Fund and those attributable to the
Class A Shares, and dividing the remainder by the number of Class A Shares
outstanding. The net asset value for Class A Shares may differ from that of
Fortress Shares 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.

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

SHARE PURCHASES

Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor or directly from the distributor, Federated Securities Corp.
once an account has been established. In connection with the sale of Shares,
Federated Securities Corp. may from time to time offer certain items of nominal
value to any shareholder or investor. The Fund reserves the right to reject any
purchase request.

THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders through a financial institution are considered received when the Fund is
notified of the purchase order. It is the financial institution's

responsibility to transmit orders promptly. Purchase orders through a registered
broker/dealer must be received by the broker before 4:00 P.M. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 P.M. (Eastern time) in
order for Shares to be purchased at that day's price. Purchase orders through
other financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 P.M. (Eastern time) in order for Shares to
be purchased at that day's price.

DIRECTLY BY MAIL. An investor may place an order to purchase Shares directly
from the distributor once an account has been established. To do so, mail a
check made payable to World Utility Fund - Class A Shares to Federated Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8604, Boston, MA
02266-8604.

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

DIRECTLY BY WIRE. To purchase Shares directly from the distributor by wire once
an account has been established, call the Fund. All information needed will be
taken over the telephone, and the order is considered received when State Street
Bank receives payment by wire. Federal funds should be wired as follows: State
Street Bank and Trust Company, Boston, Massachusetts 02105; Attention: EDGEWIRE;
For Credit to: World Utility Fund - Class A Shares; Fund Number (this number can
be found on the account statement or by contacting the Fund); Group Number or
Order Number; Nominee or Institution Name; ABA Number 011000028. Shares cannot
be purchased by wire on Columbus Day, Veterans' Day, or Martin Luther King Day.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $500 unless the investment is in a
retirement plan, in which case the minimum initial investment is $50. Subsequent
investments must be in amounts of at least $100, except for retirement plans,
which must be in amounts of at least $50.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:

<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
- -------------------------------------------- ----------------------- --------------------
<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 $750,000............. 2.00% 2.04%
$750,000 but less than $1 million........... 1.00% 1.01%
$1 million or more.......................... 0.00% 0.00%
</TABLE>

The net asset value is determined at 4:00 P.M. (Eastern time) or at the close of
the New York Stock Exchange, Monday through Friday, except on: (i) days on which
there are not sufficient changes in the value of the Fund's portfolio securities
that its net asset value might be materially affected; (ii) days

during which no Shares are tendered for redemption and no orders to purchase
Shares are received; or (iii) the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.

Shareholders designated as Liberty Life Members are exempt from sales charges.

No sales charge is imposed for Shares purchased through bank trust departments
or investment advisers registered under the Investment Advisers Act of 1940. In
addition, certain institutions such as insurance companies and certain
associations, are exempt from the sales charge for purchases of Shares. However,
investors who purchase Shares through a trust department or investment adviser
may be charged an additional service fee by that institution.

DEALER CONCESSION. For sales of Shares, a dealer will normally receive up to
90% of the applicable sales charge. Any portion of the sales charge which is not
paid to a dealer will be retained by the distributor. However, the distributor,
in its sole discretion, may uniformly offer to pay all dealers selling Shares,
all or a portion the sales charge it normally retains or any other source
available to it. Such additional payments, if accepted by the dealer, may be in
the form of cash or promotional incentives, and will be predicated upon the
amount of Shares or of the Liberty Family of Funds sold by the dealer.

The sales charge for Shares sold other than through registered broker/dealers
will be retained by Federated Securities Corp. Federated Securities Corp. may
pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Shares.

REDUCING OR ELIMINATING THE SALES CHARGE

The sales charge can be reduced on the purchase of Shares through:

- quantity discounts and accumulated purchases;

- signing a 13-month letter of intent;

- using the reinvestment privilege;

- purchases with proceeds from redemptions of unaffiliated mutual fund
shares; or

- concurrent purchases.

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Fund will combine purchases
of Shares made on the same day by the investor, the investor's spouse, and the
investor's children under age 21 when it calculates the sales charge. In
addition, the sales charge, if applicable, is reduced for purchases made at one
time by a trustee or fiduciary for a single trust estate or a single fiduciary
account.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the purchase is made that Shares are already owned or

that purchases are being combined. The Fund will reduce the sales charge after
it confirms the purchases.

LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares of funds in the Liberty Family of Funds over the next 13 months, the
sales charge may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales charge adjustment depending on
the amount actually purchased within the 13-month period and a provision for the
custodian to hold 4.5% of the total amount intended to be purchased in escrow
(in Shares) until such purchase is completed.

The 4.5% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent is
not purchased. In this event, an appropriate number of escrowed Shares may be
redeemed in order to realize the difference in the sales charge.

This letter of intent will not obligate the shareholder to purchase Shares, but
if he does, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased. This letter may be
dated as of a prior date to include any purchases made within the past 90 days
toward the dollar fulfillment of the letter of intent. Prior trade prices will
not be adjusted.

REINVESTMENT PRIVILEGE. If Shares in the Fund have been redeemed, the
shareholder has a one-time right, within 120 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge.
Federated Securities Corp. must be notified by the shareholder in writing or by
his financial institution of the reinvestment in order to eliminate a sales
charge. If the shareholder redeems his Shares in the Fund, there may be tax
consequences.

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED MUTUAL FUND SHARES.
Investors may purchase Shares at net asset value, without a sales charge, with
the proceeds from the redemption of shares of a mutual fund which was sold with
a sales charge or commission and was not distributed by Federated Securities
Corp. (This does not include shares which were or would be subject to a
contingent deferred sales charge upon redemption.) The purchase must be made
within 60 days of the redemption, and Federated Securities Corp. must be
notified by the investor in writing, or by his financial institution, at the
time the purchase is made.

CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or more
funds in the Liberty Family of Funds, the purchase price of which includes a
sales charge. For example, if a shareholder concurrently invested $30,000 in one
of the other Liberty Funds with a sales charge, and $70,000 in this Fund, the
sales charge would be reduced.

To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales charge
after it confirms the purchases.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined

after an order is received by State Street Bank, plus the applicable sales
charge. A shareholder may apply for participation in this program through his
financial institution or directly through the Fund.

EXCHANGING SECURITIES FOR FUND SHARES

Investors may exchange certain securities or a combination of securities and
cash for Shares. The securities and any cash must have a market value of at
least $25,000. From time to time the Fund will prepare a list of securities
which may be eligible for acceptance and furnish this list to brokers upon
request. Securities accepted by the Fund are valued in the same manner as the
Fund values its portfolio securities. Investors wishing to exchange securities
should first contact their investment broker, who will contact Federated
Securities Corp.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
on the application or by contacting the Fund.

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

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Distributions of any net realized capital gains will be
made at least once every twelve months. Dividends and distributions are
automatically reinvested in additional Shares on the payment date, at the
ex-dividend date net asset value without a sales charge, unless shareholders
request cash payments on the new account form or by writing to the transfer
agent. All shareholders on the record date are entitled to the dividend. If
Shares are redeemed or exchanged prior to the record date or purchased after the
record date, those Shares are not entitled to that quarter's dividend.

RETIREMENT PLANS

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

EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------

Class A shareholders may exchange all or some of their Shares for Class A Shares
in other funds in the Liberty Family of Funds. Shareholders of Class A Shares
may also exchange into certain Federated Funds which are sold with a sales
charge different from that of Shares or with no sales charge and which are
advised by subsidiaries or affiliates of Federated Investors. These exchanges
are made at net asset value plus the difference between Shares' sales charge
already paid and any sales charge of the fund into which the Shares are to be
exchanged, if higher. Neither the Fund nor any of the funds in the Liberty
Family of Funds imposes any additional fees on exchanges.

REDUCED SALES CHARGE

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

REQUIREMENTS FOR EXCHANGE

Shareholders using this privilege must exchange Shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.

This privilege is available to shareholders resident in any state in which the
fund Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in Class A shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.

Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

Instructions for exchanges for the Liberty Family of Funds and certain Federated
Funds may be given in writing or by telephone. Telephone exchange instructions
may be recorded. If reasonable procedures are not followed by the Fund, it may
be liable for losses due to unauthorized or fraudulent telephone instructions.
Written instructions may require a signature guarantee. Shareholders of the Fund
may have difficulty in making exchanges by telephone through brokers and other
financial institutions during times of drastic economic or market changes. If a
shareholder cannot contact his broker or financial institution by telephone, it
is recommended that an exchange request be made in writing and sent by overnight
mail to Federated Services Company, Two Heritage Drive, North Quincy,
Massachusetts 02171.

TELEPHONE INSTRUCTIONS. Shares may be exchanged between two funds by telephone
only if the two funds have identical shareholder registrations.

Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, in care of State Street Bank and
deposited to the shareholder's account before being exchanged. Telephone
exchange instructions are recorded and will be binding upon the shareholder.
Such instructions will be processed as of 4:00 P.M. (Eastern time) and must be
received by State Street Bank before that time for Shares to be exchanged the
same day. Shareholders exchanging into a fund will not receive any dividend that
is payable to shareholders of record on that date. This privilege may be
modified or terminated at any time.

REDEEMING CLASS A SHARES
- --------------------------------------------------------------------------------

The Fund redeems Shares at their net asset value next determined after State
Street Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemptions can be made through a
financial institution or directly from the Fund by written request. Redemption
requests must be received in proper form.

THROUGH A FINANCIAL INSTITUTION

A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution less any applicable contingent deferred
sales charge. Redemption requests through a registered broker/dealer must be
received by the broker before 4:00 P.M. (Eastern time) and must be transmitted
by the broker to the Fund before 5:00 P.M. (Eastern time) in order for Shares to
be redeemed at that day's net asset value. Redemption requests through other
financial institutions must be received by the financial institution and
transmitted to the Fund before 4:00 P.M. (Eastern time) in order for Shares to
be redeemed at that day's net asset value. The financial institution is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the Fund. The financial institution may
charge customary fees and commissions for this service.

DIRECTLY FROM THE FUND

BY TELEPHONE. Shareholders who have not purchased through a financial
institution may redeem their Shares by telephoning the Fund. The proceeds will
be mailed to the shareholder's address of record or wire transferred to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System, normally within one business day, but in no event longer
than seven days after the request. The minimum amount for a wire transfer is
$1,000. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.

An authorization form permitting State Street Bank to accept telephone requests
must first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as redeeming by mail, should be considered.

BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company, P.O. Box 8604, Boston, MA 02266-8604. The written
request should include the shareholder's name, the Fund name and class of shares
name, the account number, and the Share or dollar amount requested and should be
signed exactly as the Shares are registered.

If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.

SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:

- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;

- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or

- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.

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

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in Shares. For this reason, payments under this program
should not be considered as yield or income on the shareholder's investment in
Shares. To be eligible to participate in this program, a shareholder must have
an account value of at least $10,000. A shareholder may apply for participation
in this program through his financial institution. Due to the fact that Shares
are sold with a sales charge, it is not advisable for shareholders to be
purchasing Shares while participating in this program.

ACCOUNTS WITH LOW BALANCES

Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.

WORLD INVESTMENT SERIES, INC. INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE CORPORATION

BOARD OF DIRECTORS. The Corporation is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs and
for exercising all the Corporation's powers except those reserved for the
shareholders. An Executive Committee of the Board of Directors handles the
Board's responsibilities between meetings of the Board.

OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations and present positions, including any affiliation with
Federated Investors, Federated Management, Federated Securities Corp., Federated
Administrative Services, and the Funds described in the Statement of Additional
Information.

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE CORPORATION DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
John F. Donahue+* Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Director Advisers, Federated Management, and Federated Research; Director, AEtna Life
Tower and Casualty Company; Chief Executive Officer and Director,Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J. Christopher Donahue,
Vice-President of the Corporation.
- ------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Director President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village
Department and Associates, Development Corporation; John R. Wood Partner or Trustee in private real
Inc., Realtors estate ventures in Southwest Florida; Director, Trustee, or Managing General
3255 Tamiami Trail North Partner of the Funds; formerly, President, Naples Property Management, Inc.
Naples, FL
- ------------------------------------------------------------------------------------------------------------------
William J. Copeland Director Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Bank, N.A. and PNC Financial Corp and Director,
Pittsburgh, PA Ryan Homes, Inc.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE CORPORATION DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
James E. Dowd Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
- ------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee University of
Suite 1111 Pittsburgh; Director Trustee, or Managing General Partner of the Funds.
- ------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Director Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- ------------------------------------------------------------------------------------------------------------------
Peter E. Madden Director Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly, President,
Boston, MA State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
- ------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Pittsburgh, PA Chairman, Horizon Financial, F.A.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE CORPORATION DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Learning Endowment for International Peace, RAND Corporation, Online Computer Library
University of Pittsburgh Center, Inc., and U.S. Space Foundation; Chairman, National Advisory Council
Pittsburgh, PA for Environmental Policy and Technology; Chairman, Czecho Slovak Management
Center; Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
- ------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General
Pittsburgh, PA Partner of the Funds.
- ------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President and Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- ------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management and Federated Research; President and Director,
Tower Federated Administrative Services; President or Vice President of the Funds;
Director, Trustee, or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Director of the
Corporation.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE CORPORATION DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Chairman, Treasurer, and Director, Federated
Administrative Services. Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
- ------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Executive Vice President,
Pittsburgh, PA Secretary, and Director, Federated Administrative Services; Director and
Executive Vice President, Federated Securities Corp.; Vice President and
Secretary of the Funds.
- ------------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Vice President of the Funds,
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
President, The Standard Fire Insurance Company and President of its
Federated Research Division.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

* This Director is deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940.

+ Members of the Corporation's Executive Committee. The Executive Committee of
the Board of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.

Officers and Directors own less than 1% of the Fund's outstanding shares.

INVESTMENT ADVISER. Under the terms of an Advisory Agreement between the
Corporation and Federated Management, Federated Management will furnish to the
Fund such investment advice, statistical and other factual information as may
from time to time be reasonably requested by the Fund.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to 1.00% of average daily net assets of the Fund. The fee paid by
the Fund, while higher than the advisory fee paid by other mutual funds in
general, is comparable to fees paid by other mutual funds with similar
objectives and policies. The adviser may voluntarily choose to waive a
portion of its fee or reimburse the Fund for certain operating expenses.
The adviser can terminate this voluntary reimbursement of expenses at any
time at its sole discretion. The adviser has also undertaken to reimburse
the Fund for operating expenses in excess of limitations established by
certain states.

ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts
with combined assets of approximately $75 billion. Federated Investors, which
was founded in 1956 as Federated Investors, Inc., develops and manages mutual
funds primarily for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment philosophy
serve approximately 3,500 client institutions nationwide. Through these same
client institutions, individual shareholders also have access to this same level
of investment expertise.

Christopher H. Wiles has been the Fund's portfolio manager since its inception.
Mr. Wiles joined Federated Investors in 1990 and has been a Vice President of
the Investment Adviser since 1992. Mr. Wiles served as Assistant Vice President
of the Investment Adviser from 1990 until 1992. Mr. Wiles was a portfolio
manager at Mellon Bank from 1986 until 1990. Mr. Wiles is a Chartered Financial
Analyst and received his M.B.A. in Finance from Cleveland State University.

DISTRIBUTION OF CLASS A SHARES

Federated Securities Corp. is the principal distributor for Shares. Federated
Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Shareholder Services Plan, certain financial
institutions may be compensated by the adviser or its affiliates for the
continuing investment of customers' assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly by the
distributor or adviser from their assets, and will not be made from the assets
of the Fund by the assessment of a sales charge on Shares.

ADMINISTRATION OF THE FUND

rate which relates to the average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors ("Federated Funds") as specified
below:

<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
- --------------------- -------------------------------------

<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 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 Administrative Services may choose voluntarily to waive a portion of
its fee.

SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select Financial Institutions to perform shareholder services. Financial
Institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.

The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the administrative capacities
described above or should Congress relax current restrictions on depository
institutions, the Board of Directors will consider appropriate changes in the
administrative services.

State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.

CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, 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,
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, is transfer
agent for Shares and dividend disbursing agent for the Fund.

LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin, 2101 L Street, N.W., Washington, D.C. 20037.

INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
One Oxford Centre, Pittsburgh, Pennsylvania 15219.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Investment Adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the adviser will generally utilize
those who are recognized dealers in specific portfolio instruments, except when
a better price and execution of the order can be obtained elsewhere. In
selecting among firms believed to meet this criteria, the adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by Federated Securities Corp. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Directors.

EXPENSES OF THE FUND AND CLASS A SHARES

Holders of each class of shares pay their allocable portion of Fund and
Corporation expenses.

The Corporation expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Corporation and
continuing its existence; registering the Corporation with federal and state
securities authorities; Directors' fees; auditors' fees; the cost of meetings of
Directors; legal fees of the Corporation; association membership dues; and such
non-recurring and extraordinary items as may arise from time to time.

The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise from time to time.

At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Services Plan. However, the Directors reserve the
right to allocate certain other expenses to holders of Shares as it deems
appropriate ("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; fees under the Services Plan; printing and
postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and
registration fees paid to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
legal fees relating solely to Shares; and Directors' fees incurred as a result
of issues relating solely to Shares.

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

VOTING RIGHTS

except that only shares of that particular Fund or class are entitled to vote in
matters affecting that Fund or class.

As a Maryland corporation, the Corporation is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under certain
circumstances.

Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. The Directors shall call a Special Meeting of Shareholders upon the
written request of shareholders owning at least 10% of the Corporation's
outstanding shares entitled to vote.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company (PFIC). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Corporation's other portfolios, if any, will not be combined for tax purposes
with those realized by the Fund.

Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemptions on this income. The effective rate of foreign
tax cannot be predicted since the amount of Fund assets to be invested within
various countries is unknown. However, the Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares.

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 Internal Revenue Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Internal Revenue Code may limit a shareholder's ability to claim a
foreign tax credit. Furthermore, shareholders who elect to deduct their portion
of the Fund's foreign taxes rather than take the foreign tax credit must itemize
deductions on their income tax returns.

PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Fund:

- the Fund is subject to the Pennsylvania corporate franchise tax; and

- Fund Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

Fortress Shares, the other class of shares offered by the Fund, are sold
primarily to customers of financial institutions with an initial sales charge of
1.00%. Fortress Shares are distributed pursuant to a Rule 12b-1 Plan adopted by
the Fund whereby the distributor is paid a fee of up to .25 of 1% and a
shareholder servicing fee of .25 of 1% of the Fortress Shares' average daily net
assets. Fortress Shares are subject to a contingent deferred sales charge of up
to 1.00% under certain circumstances. Investments in Fortress Shares are subject
to a minimum initial investment of $1,500, unless the investment is in a
retirement account, in which case the minimum investment is $50.

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

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

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

Total return represents the change, over a specified period of time, in the
value of an investment in Shares after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

The performance information reflects the effect of the maximum sales load and
other similar non-recurring charges which, if excluded, would increase the total
return.

From time to time, the Fund may advertise the performance of Class A Shares
using certain financial publications and/or compare its performance to certain
indices.

Total return will be calculated separately for Class A Shares and Fortress
Shares. Because Fortress Shares are subject to Rule 12b-1 fees, the total return
for Class A Shares, for the same period may exceed that of Fortress Shares.

WORLD UTILITY FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
STATEMENT OF ASSETS AND LIABILITIES
MARCH 17, 1994
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
- ----------------------------------------------------------------------------------
Cash $100,000
- ---------------------------------------------------------------------------------- --------
LIABILITIES: --
- ---------------------------------------------------------------------------------- --------
NET ASSETS for 10,000 Class A Shares of beneficial interest outstanding $100,000
- ---------------------------------------------------------------------------------- --------
NET ASSET VALUE, and Redemption Price Per Share: ($100,000 / 10,000 Class A Shares
of beneficial interest outstanding) $ 10.00
- ---------------------------------------------------------------------------------- --------
Computation of Offering Price: Offering Price per Class A Share (100/95.5 of
$10.00)* $ 10.47
- ---------------------------------------------------------------------------------- --------
</TABLE>

* See "What Shares Cost" in the prospectus.

(1) World Investment Series, Inc. (the "Corporation") was established as a
Maryland corporation under Articles of Incorporation dated January 25, 1994.
The Corporation has had no operations since that date other than those
relating to organizational matters, including the issuance on March 17, 1994
of 10,000 Class A Shares of the World Utility Fund at $10.00 per share to
Federated Administrative Services, the Administrator to the Fund. Expenses
of organization incurred by the Corporation, $35,000, were borne initially
by the Administrator. The Corporation has agreed to reimburse the
Administrator for organizational expenses initially borne by the
Administrator during the five year period following the date the
Corporation's registration statement first became effective.

REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------

To the Board of Trustees and Shareholders of
WORLD INVESTMENT SERIES, INC.:

We have audited the accompanying statement of assets and liabilities of World
Utility Fund as of March 17, 1994. This statement of assets and liabilities is
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on this statement of assets and liabilities based on our
audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the statement of assets and liabilities presents fairly, in all
material respects, the net assets of the World Utility Fund as of March 17, 1994
in conformity with generally accepted accounting principles.

ERNST & YOUNG

Pittsburgh, Pennsylvania
March 18, 1994

ADDRESSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
World Utility Fund Federated Investors Tower
Class A Shares Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>

WORLD UTILITY FUND

CLASS A SHARES
PROSPECTUS

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

April 15, 1994

FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------------
Distributor

A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER

PITTSBURGH, PA 15222-3779

4021404A-A (4/94)

WORLD UTILITY FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
FORTRESS SHARES
PROSPECTUS

The Fortress Shares of World Utility Fund (the "Fund") offered by this
prospectus represent interests in the Fund, which is a diversified investment
portfolio in World Investment Series, Inc. (the "Corporation"), an open-end,
management investment company (a mutual fund).

The Fund's investment objective is to provide total return. The Fund invests
primarily in securities issued by domestic and foreign companies in the
utilities industries.

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

The Fund has also filed a Combined Statement of Additional Information for
Fortress Shares and Class A Shares dated April 15, 1994, with the Securities and
Exchange Commission. The information contained in the Combined Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Combined Statement of Additional Information free of
charge by calling 1-800-235-4669. To obtain other information or make inquiries
about the Fund, contact your financial institution.

Prospectus dated April 15, 1994

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

FORTRESS INVESTMENT PROGRAM 2
- ------------------------------------------------------

INVESTMENT INFORMATION 3
- ------------------------------------------------------

Investment Objective 3
Investment Policies 3

Risk Factors and Investment Considerations 5

NET ASSET VALUE 9
- ------------------------------------------------------

INVESTING IN FORTRESS SHARES 9
- ------------------------------------------------------

Share Purchases 9
Through a Financial Institution 9
Directly By Mail 10

By Wire 10

Minimum Investment Required 10
What Shares Cost 10
Dealer Concession 11
Eliminating the Sales Charge 11
Quantity Discounts and Accumulated
Purchases 11
Letter of Intent 12
Reinvestment Privilege 12
Concurrent Purchases 12
Systematic Investment Program 12
Exchanging Securities for Fund Shares 12
Exchange Privileges 13
Certificates and Confirmations 13
Dividends and Distributions 13

REDEEMING FORTRESS SHARES 13
- ------------------------------------------------------

Through a Financial Institution 13
Directly by Mail 14
Signatures 14
Receiving Payment 15
Contingent Deferred Sales Charge 15
Systematic Withdrawal Program 15
Accounts with Low Balances 16

WORLD INVESTMENT SERIES, INC. INFORMATION 16
- ------------------------------------------------------

Management of the Corporation 16
Board of Directors 16
Officers and Directors 16
Investment Adviser 20
Advisory Fees 20
Adviser's Background 20
Distribution of Fortress Shares 21
Distribution and Shareholder Services Plans 21

Other Payments to Financial Institutions 21
Administration of the Fund 22
Administrative Services 22
Custodian 22

Transfer Agent and Dividend
Disbursing Agent 22
Legal Counsel 22
Independent Auditors 22
Brokerage Transactions 22
Expenses of the Fund and Fortress Shares 23

SHAREHOLDER INFORMATION 23
- ------------------------------------------------------

Voting Rights 23

TAX INFORMATION 24
- ------------------------------------------------------

Federal Income Tax 24
Pennsylvania Corporate and Personal
Property Taxes 24

OTHER CLASSES OF SHARES 25
- ------------------------------------------------------

PERFORMANCE INFORMATION 25
- ------------------------------------------------------

ADDRESSES Inside Back Cover
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
FORTRESS SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... 1.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)......................................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)(1).................................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None
ANNUAL FORTRESS SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(2).............................................................. 0.39%
12b-1 Fee..................................................................................... 0.25%
Total Other Expenses.......................................................................... 0.60%
Shareholder Servicing Fee.......................................................... 0.25%
Total Fortress Shares Operating Expenses(3).......................................... 1.24%
</TABLE>

(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within four
years of their purchase date.

(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can terminate
this voluntary waiver at any time at its sole discretion. The maximum management
fee is 1.00%.

(3) The Total Fortress Shares Operating Expenses are estimated to be 1.85%
absent the anticipated voluntary waiver of a portion of the management fee.

* TOTAL FORTRESS SHARES OPERATING EXPENSES ARE ESTIMATED BASED ON AVERAGE
EXPENSES EXPECTED TO BE INCURRED DURING THE PERIOD ENDING NOVEMBER 30, 1994.
DURING THE COURSE OF THIS PERIOD, EXPENSES MAY BE MORE OR LESS THAN THE AVERAGE
AMOUNT SHOWN.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF FORTRESS SHARES OF THE FUND
WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN FORTRESS SHARES" AND "WORLD
INVESTMENT SERIES, INC. INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN
$5,000 MAY BE SUBJECT TO ADDITIONAL FEES.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------------------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period............. $ 33 $60
You would pay the following expenses on the same investment, assuming no
redemption......................................................................... $ 23 $49
</TABLE>

The information set forth in the foregoing table and example relates only to
Fortress Shares of the Fund. The Fund also offers another class of shares called
Class A Shares. Fortress Shares and Class A Shares are subject to certain of the
same expenses; however, Class A Shares are subject to a maximum sales load of
4.50%, but are not subject to a 12b-1 fee or a contingent deferred sales charge.
See "Other Classes of Shares".

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Corporation was established as a corporation under the laws of the state of
Maryland on January 25, 1994. The Corporation's address is Liberty Center,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of
Incorporation permit the Corporation to offer separate series of shares
representing interests in separate portfolios of securities. The shares in any
one portfolio may be offered in separate classes. With respect to this Fund, as
of the date of this prospectus, the Board of Directors ("Directors") have
established two classes of shares, known as Fortress Shares and Class A Shares.
This prospectus relates only to Fortress Shares ("Shares") of the Corporation's
portfolio known as World Utility Fund.

Shares of the Fund are designed to give institutions and individuals a
convenient means of seeking total return without undue risk through a
professionally managed, diversified portfolio comprised primarily of foreign and
domestic utility securities. The Fund is not intended to provide a complete
investment program for an investor. A minimum initial investment of $1,500 is
required, unless the investment is in a retirement account, in which case the
minimum investment is $50.

In general, Shares are sold at net asset value plus an applicable sales charge
and are redeemed at net asset value. However, a contingent deferred sales charge
is imposed on Shares, other than Shares purchased through reinvestment of
dividends, which are redeemed within one to four years of their purchase date.
For a more complete description, see "Redeeming Fortress Shares."

FORTRESS INVESTMENT PROGRAM
- --------------------------------------------------------------------------------

This class of shares is a member of a family of funds, collectively known as the
Fortress Investment Program. The other funds in the Program are:

AMERICAN LEADERS FUND, INC. (FORTRESS SHARES ONLY), providing growth of
capital and income through high-quality stocks;

CALIFORNIA MUNICIPAL INCOME FUND (FORTRESS SHARES ONLY), providing current
income exempt from federal regular income tax and California personal
income taxes;

FORTRESS ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC., providing current
income consistent with lower volatility of principal through a diversified
portfolio of adjustable and floating rate mortgage securities which are
issued or guaranteed by the U.S. government, its agencies or
instrumentalities;

FORTRESS BOND FUND, providing current income primarily through high-quality
corporate debt;

FORTRESS MUNICIPAL INCOME FUND, providing a high level of current income
generally exempt from federal regular income tax by investing primarily in
a diversified portfolio of municipal bonds;

FORTRESS UTILITY FUND, providing high current income and moderate
appreciation primarily through equity and debt securities of utility
companies;

GOVERNMENT INCOME SECURITIES, INC., providing current income through
long-term U.S. government securities;

LIBERTY EQUITY INCOME FUND, INC. (FORTRESS SHARES ONLY), an equity fund
investing primarily in stocks which have a history of regular dividends;

LIMITED TERM FUND (FORTRESS SHARES ONLY), providing a high level of current
income consistent with minimum fluctuation in principal value;

LIMITED TERM MUNICIPAL FUND (FORTRESS SHARES ONLY), providing a high level
of current income which is exempt from federal regular income tax
consistent with the preservation of capital;

MONEY MARKET MANAGEMENT, INC., providing current income consistent with
stability of principal through high-quality money market instruments;

NEW YORK MUNICIPAL INCOME FUND (FORTRESS SHARES ONLY), providing current
income exempt from federal regular income tax, New York personal income
taxes, and New York City income taxes; and

OHIO MUNICIPAL INCOME FUND (FORTRESS SHARES ONLY), providing current income
exempt from federal regular income tax and Ohio personal taxes.

STRATEGIC INCOME FUND (FORTRESS SHARES ONLY), a fund providing high current
income through investing in domestic corporate debt obligations, U.S.
government securities, and foreign government and corporate debt
obligations.

Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.

The Fortress Investment Program provides flexibility and diversification for
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles, and by providing
the investment services of proven, professional investment advisers.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

Debt obligations in the portfolio, at the time they are purchased, generally
will be limited to those which fall in one of the following categories: (i)
rated BBB or better by Standard & Poor's Corporation or Baa by Moody's Investors
Service, Inc., or (ii) determined by the Investment Adviser to be of investment
grade and not rated by either of the aforementioned rating services. However,
the Fund may invest up to 35% of the value of its total assets in lower-rated
convertible and non-convertible debt obligations that are not investment grade
bonds, but are rated CCC or better by Standard & Poor's Corporation or Caa or
better by Moody's Investors Service, Inc., or are not rated but are determined
by the Investment Adviser to be of comparable quality. Securities rated BB, B,
and CCC by Standard & Poor's Corporation or Ba, B, and Caa by Moody's Investors
Service, Inc. either have speculative characteristics or are predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligations. Debt obligations that are not
determined to be investment grade are high-yield high-risk bonds, typically
subject to greater market fluctuations, and securities in the lowest rating
category may be in danger of loss of income and principal due to an issuer's
default. To a greater extent than investment grade bonds, the value of
lower-rated bonds tends to reflect short-term corporate, economic, and market
developments, as well as investor perceptions of the issuer's credit quality. In
addition, lower rated bonds may be more difficult to dispose of or to value than
high-rated, lower-yielding bonds. The Investment Adviser attempts to reduce the
risks described above through diversification of the portfolio and by credit
analysis of each issuer as well as by monitoring broad economic trends and
corporate and legislative developments. In the event the rating on an issue held
in the Fund's portfolio is changed by the ratings services (or, for an unrated
issue, in the determination of the Investment Adviser), such event will be
considered by the Investment Adviser in its evaluation of the overall investment
merits of that security, but will not necessarily result in the automatic sale
of the security. A description of the rating categories is contained in the
Appendix to the Combined Statement of Additional Information.

For temporary defensive purposes and to maintain liquidity in anticipation of
favorable investment opportunities, the Fund may invest in short-term money
market instruments including securities of other investment companies,
certificates of deposit, obligations issued or guaranteed by the United States
government or its agencies or instrumentalities, commercial paper rated not
lower than A-1 by Standard & Poor's Corporation or Prime-1 by Moody's Investors
Service, Inc. or repurchase agreements.

RISK FACTORS AND INVESTMENT CONSIDERATIONS

In addition to the foregoing considerations which affect most utility companies,
there are specific considerations which affect specific utility industries:

EXCHANGE RATES. Foreign securities are denominated in foreign currencies.
Therefore, the value in U.S. dollars of the Fund's assets and income may be
affected by changes in exchange rates and

OTHER INVESTMENT PRACTICES

hedging strategy is highly uncertain due to the difficulties of predicting
short-term currency market movements and of precisely matching forward contract
amounts and the constantly changing value of the securities involved. Although
the Investment Adviser will consider the likelihood of changes in currency
values when making investment decisions, the Investment Adviser believes that it
is important to be able to enter into forward contracts when it believes the
interests of the Fund will be served. The Fund will not enter into forward
contracts for hedging purposes in a particular currency in an amount in excess
of the Fund's assets denominated in that currency. No more than 30% of the
Fund's assets will be committed to forward contracts for hedging purposes at any
time. (This restriction does not include forward contracts entered into to
settle securities transactions.)

INVESTMENT LIMITATIONS

The Fund will not:

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Fortress Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Fortress Shares in the liabilities of the Fund and those attributable to the
Fortress Shares, and dividing the remainder by the number of Fortress Shares
outstanding. The net asset value for Fortress Shares may differ from that of
Class A Shares 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.

INVESTING IN FORTRESS SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution who has a sales agreement with the
distributor or directly from the distributor, Federated Securities Corp. either
by mail or by wire once an account has been established. The Fund reserves the
right to reject any purchase request.

received by the broker before 4:00 P.M. (Eastern time) and must be transmitted
by the broker to the Fund before 5:00 P.M. (Eastern time) in order for Shares to
be purchased at that day's price. Purchase orders through other financial
institutions must be received by the financial institution and transmitted to
the Fund before 4:00 P.M. (Eastern time) in order for Shares to be purchased at
that day's price.

The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Other Payments to Financial Institutions").

DIRECTLY BY MAIL. An investor may place an order to purchase Shares directly by
mail from the distributor once an account has been established. To do so, mail a
check made payable to World Utility Fund-Fortress Shares to Federated Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8604, Boston, MA
02266-8604.

Purchases by mail are considered received after payment by check is converted by
State Street Bank and Trust Company ("State Street Bank") into federal funds.
This is generally the next business day after State Street Bank receives the
check.

BY WIRE. To purchase Shares directly from the distributor by wire once an
account has been established, call the Fund. All information needed will be
taken over the telephone, and the order is considered received when State
Street Bank receives payment by wire. Federal funds should be wired as
follows: State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: EDGEWIRE; For Credit to: World Utility Fund--Fortress Shares;
Fund Number (this number can be found on the account statement or by
contacting the Fund); Group Number or Order Number; Nominee or Institution
Name; ABA Number 011000028. Shares cannot be purchased by wire on Columbus
Day, Veteran's Day, or Martin Luther King Day.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $1,500 unless the investment is in a
retirement plan, in which case the minimum initial investment is $50. Subsequent
investments must be in amounts of at least $100, except for retirement plans,
which must be in amounts of at least $50.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of the
net amount invested). There is no sales charge for purchases of $1 million or
more. In addition, no sales charge is imposed for Shares purchased through bank
trust departments or investment advisers registered under the Investment
Advisers Act of 1940 purchasing on behalf of their clients, or by sales
representatives, Directors, and employees of the Fund, Federated Management, and
Federated Securities Corp., or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., their spouses and
children under age 21, or any trusts or pension or profit-sharing plans for
these persons. Unaffiliated institutions through whom Shares are purchased may
charge fees for services provided which may be related to the ownership of Fund
Shares. This prospectus should, therefore, be read together with any agreement
between the

customer and the institution with regard to services provided, the fees charges
for these services, and any restriction and limitation imposed.

The net asset value is determined at 4:00 p.m. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; or (iii) the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

Under certain circumstances, described under "Redeeming Fortress Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.

DEALER CONCESSION. For sales of Shares, broker/dealers will normally receive
100% of the applicable sales charge. Any portion of the sales charge which is
not paid to a broker/dealer will be retained by the distributor. However, from
time to time, and at the sole discretion of the distributor, all or a part of
that portion may be paid to a dealer. The sales charge for Shares sold other
than through registered broker/dealers will be retained by Federated Securities
Corp. Federated Securities Corp. may pay fees to banks out of the sales charge
in exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the initiation of customer accounts and
purchases of Shares.

ELIMINATING THE SALES CHARGE

The sales charge can be eliminated on the purchase of Shares through:

- quantity discounts and accumulated purchases;

- signing a 13-month letter of intent;

- using the reinvestment privilege; or

- concurrent purchases

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. There is no sales charge for
purchases of $1 million or more. The Fund will combine purchases of Shares made
on the same day by the investor, the investor's spouse, and the investor's
children under age 21 when it calculates the sales charge.

If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $900,000 and he
purchases $100,000 more at the current public offering price, there will be no
charge on the additional purchase. The Fund will also combine purchases for the
purpose of reducing the contingent deferred sales charge imposed on some Shares
redemptions. For example, if a shareholder already owns Shares having a current
value at public offering price of $1 million and purchases an additional $1
million at the current public offering price, the applicable contingent deferred
sales charge would be reduced to 0.50% of those additional Shares. For more
information on the levels of contingent deferred sales charges and holding
periods, see the section entitled "Contingent Deferred Sales Charge."

To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the shareholder
in writing or by his financial institution

at the time the purchase is made that Shares are already owned or that purchases
are being combined. The Fund will eliminate the sales charge after it confirms
the purchases.

LETTER OF INTENT. If a shareholder intends to purchase at least $1 million of
Shares over the next 13 months, the sales charge may be eliminated by signing a
letter of intent to that effect. This letter of intent includes a provision for
a sales charge elimination depending on the amount actually purchased within the
13-month period and a provision for the Fund's custodian to hold 1.00% of the
total amount intended to be purchased in escrow (in Shares) until such purchase
is completed.

The 1.00% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent,
which must be $1 million or more Shares, is not purchased. In this event, an
appropriate number of escrowed Shares may be redeemed in order to realize the
1.00% sales charge.

This letter of intent will not obligate the shareholder to purchase Shares. This
letter may be dated as of a prior date to include any purchases made within the
past 90 days (purchases within the prior 90 days may be used to fulfill the
requirements of the letter of intent; however, the sales charge on such
purchases will not be adjusted to reflect a lower sales charge).

REINVESTMENT PRIVILEGE. If Shares in the Fund have been redeemed, the
shareholder has a one-time right, within 120 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge.
Federated Securities Corp. must be notified by the shareholder in writing or by
his financial institution of the reinvestment in order to receive this
elimination of the sales charge. If the shareholder redeems his Shares in the
Fund, there may be tax consequences.

CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
elimination, a shareholder has the privilege of combining concurrent purchases
of two or more funds in the Fortress Investment Program, the purchase price of
which includes a sales charge. For example, if a shareholder concurrently
invested $400,000 in one of the other Fortress Funds, and $600,000 in Shares,
the sales charge would be eliminated.

To receive this sales charge elimination, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will reduce the sales charge
after it confirms the purchases.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
periodically from the shareholder's checking account and invested in Shares at
the net asset value next determined after an order is received by State Street
Bank, plus the 1.00% sales charge for purchases under $1 million. A shareholder
may apply for participation in this program through Federated Securities Corp.
or his financial institution.

EXCHANGING SECURITIES FOR FUND SHARES

request. Securities accepted by the Fund are valued in the same manner as the
Fund values its portfolio securities. Investors wishing to exchange securities
should first contact their investment broker, who will contact Federated
Securities Corp.

EXCHANGE PRIVILEGES

Shares may be exchanged for shares in other Fortress Funds at net asset value
without a sales charge or a contingent deferred sales charge.

Shares may also be exchanged for shares in other Federated Funds which are
advised by subsidiaries or affiliates of Federated Investors. With the exception
of exchanges into other Fortress Funds, such exchanges will be subject to a
contingent deferred sales charge and possibly a sales charge.

Shareholders using this privilege must exchange Shares having a net asset value
which at least meets the minimum investment required for the fund into which the
exchange is being made. A shareholder may obtain information on the exchange
privilege, and may obtain prospectuses for other Fortress Funds and Federated
Funds by calling Federated Securities Corp. or his financial institution.

CERTIFICATES AND CONFIRMATIONS

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly statements are sent to report dividends paid during the
quarter.

DIVIDENDS AND DISTRIBUTIONS

REDEEMING FORTRESS SHARES
- --------------------------------------------------------------------------------

The Fund redeems Shares at their net asset value, less any applicable contingent
deferred sales charge, next determined after State Street Bank receives the
redemption request. Redemptions will be made on days on which the Fund computes
its net asset value. Redemption requests must be received in proper form and can
be made through a financial institution or directly from the Fund by written
request.

THROUGH A FINANCIAL INSTITUTION

the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 P.M. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 P.M. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 P.M. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders will be promptly notified.

Before a financial institution may request redemption by telephone on behalf of
a shareholder, an authorization form permitting the Fund to accept telephone
requests must first be completed. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.

DIRECTLY BY MAIL

Shareholders may also redeem Shares by sending a written request to Federated
Services Company, c/o State Street Bank, P.O. Box 8604, Boston, MA 02266-8604.
The written request must include the shareholder's name, the Fund name and class
of shares name, the account number, the Share or dollar amount to be redeemed,
and should be signed exactly as Shares are registered.

- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;

- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or

- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

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

CONTINGENT DEFERRED SALES CHARGE

Shareholders redeeming Shares from their Fund accounts within certain time
periods from the purchase dates of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of the lesser of the original
purchase price or the net asset value of the Shares redeemed as follows:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
- ------------------------- ------------------ -------------------
<S> <C> <C>
Up to $1,999,999 less than 4 years 1%
$2,000,000 to $4,999,999 less than 2 years .50%
$5,000,000 or more less than 1 year .25%
</TABLE>

In instances in which Shares have been acquired in exchange for shares in other
Fortress Funds, (i) the purchase price of the shares when originally purchased
and (ii) the time period which the shares are held will run from the date of the
original purchase. The contingent deferred sales charge will not be imposed on
Shares acquired through the reinvestment of dividends or distributions of
short-term or long-term capital gains. In computing the amount of contingent
deferred sales charge for accounts with shares subject to a single holding
period, if any, redemptions are deemed to have occurred in the following order:
1) first of Shares acquired through the reinvestment of dividends and long-term
capital gains, 2) second of purchases of Shares occurring prior to the number of
years necessary to satisfy the applicable holding period, and 3) finally of
purchases of Shares occurring within the current holding period.

The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 59 1/2; or (iii) from the death or total and permanent disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan or a custodial account does not extend
to account transfers, rollovers, and other redemptions made for purposes of
reinvestment. Contingent deferred sales charges are not charges in connection
with exchanges of Shares for shares in other Fortress Funds, or in connection
with redemptions by the Fund of accounts with low balances. Shares of the Fund
originally purchased through a bank trust department or investment adviser
registered under the Investment Advisers Act of 1940 are not subject to the
contingent deferred sales charge, to the extent that no payment was advanced for
purchases made by such entities. For more information, see "Administrative
Arrangements."

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder; the minimum withdrawal amount
is $100. Depending upon the amount of the withdrawal payments, the amount of

dividends paid and capital gains distributions with respect to Shares, and the
fluctuation of the net asset value of Shares redeemed under this program,
redemptions may reduce, and eventually deplete, the shareholder's investment in
Shares. For this reason, payments under this program should not be considered as
yield or income on the shareholder's investment in Shares. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000 at current offering price.

A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that Shares are sold with a sales charge, it is
not advisable for shareholders to be purchasing Shares while participating in
this program.

Contingent deferred sales charges are charged for Shares redeemed through this
program within four years of their purchase dates.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the balance falls below
$500 because of changes in the Fund's net asset value. Before Shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional Shares to meet the minimum requirement.

WORLD INVESTMENT SERIES, INC. INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE CORPORATION

OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations and present positions, including any affiliation with
Federated Investors, Federated Management,

Federated Securities Corp., Federated Administrative Services, and the Funds
described in the Statement of Additional Information.

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE CORPORATION DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
John F. Donahue+* Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Director Advisers, Federated Management, and Federated Research; Director, AEtna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J. Christopher Donahue,
Vice-President of the Corporation.
- ------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Director President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village Department
Department and Corporation; John R. Wood Partner or Trustee in private real estate ventures
Associates, Inc., Realtors; in Southwest Florida; Director, Trustee, or Managing General Partner of the
3255 Tamiami Trail North Funds; formerly, President, Naples Property Management, Inc.
Naples, FL
- ------------------------------------------------------------------------------------------------------------------
William J. Copeland Director Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza-- Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Bank, N.A. and PNC Financial Corp and Director,
Pittsburgh, PA Ryan Homes, Inc.
- ------------------------------------------------------------------------------------------------------------------
James E. Dowd Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
- ------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee University of
Suite 1111 Pittsburgh; Director Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE CORPORATION DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Director Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- ------------------------------------------------------------------------------------------------------------------
Peter E. Madden Director Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly, President,
Boston, MA State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
- ------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Pittsburgh, PA Chairman, Horizon Financial, F.A.
- ------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment
Learning for International Peace, RAND Corporation, Online Computer Library Center,
University of Pittsburgh Inc., and U.S. Space Foundation; Chairman, National Advisory Council for
Pittsburgh, PA Environmental Policy and Technology; Chairman, Czecho Slovak Management
Center; Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
- ------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE CORPORATION DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President and Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- ------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management and Federated Research; President and Director,
Tower Federated Administrative Services; President or Vice President of the Funds;
Pittsburgh, PA Director, Trustee, or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Director of the
Corporation.
- ------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President and Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Chairman, Treasurer, and Director, Federated
Administrative Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
- ------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President and Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Executive Vice President,
Pittsburgh, PA Secretary, and Director, Federated Administrative Services; Director and
Executive Vice President, Federated Securities Corp.; Vice President and
Secretary of the Funds.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

* This Director is deemed to be an "interested person" of the Corporation as
defined in the Investment Company Act of 1940.

+ Members of the Corporation's Executive Committee. The Executive Committee of
the Board of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.

Officers and Directors own less than 1% of the Fund's outstanding shares.

Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts with combined assets of approximately $75 billion. Federated
Investors, which was founded in 1956 as Federated Investors, Inc., develops
and manages mutual funds primarily for the financial industry. Federated
Investors' track record of competitive performance and its disciplined,
risk-averse investment philosophy serve approximately 3,500 client
institutions nationwide. Through these same client institutions, individual
shareholders also have access to this same level of investment expertise.

Christopher H. Wiles has been the Fund's portfolio manager since its
inception. Mr. Wiles joined Federated Investors in 1990 and has been a Vice
President of the Investment Adviser since 1992. Mr. Wiles served as
Assistant Vice President of the Fund's investment adviser from 1990 until
1992. Mr. Wiles was a portfolio manager at Mellon Bank from 1986 until
1990. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A. in
Finance from Cleveland State University.

DISTRIBUTION OF FORTRESS SHARES

DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of
0.25 of 1% of the average daily net asset value of Shares to finance any
activity which is principally intended to result in the sale of shares subject
to the Distribution Plan. The distributor may select Financial Institutions such
as banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers.

The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.

In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of Shares to obtain certain personal services for shareholders
and the maintenance of shareholder accounts ("shareholder services"). The Fund
has entered into a Shareholder Services Agreement with Federated Shareholder
Services, a subsidiary of Federated Investors, under which Federated Shareholder
Services will either perform shareholder services directly or will select
Financial Institutions to perform shareholder services. Financial Institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition, the distributor will pay
financial institutions, for distribution and/or administrative services, an
amount equal to 1.00% of the offering price of the Shares acquired by their
clients or customers on purchases up to $1,999,999, .50% of the offering price
on purchases of $2,000,000 to $4,999,999, and .25% of the offering price on
purchases of $5,000,000 or more. (This fee is in addition to the 1.00% sales
charge on purchases of less than $1 million.) The financial institutions may
elect to receive amounts less than those stated, which would reduce the stated
contingent deferred sales charge and/or the holding period used to calculate the
fee.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below.

<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
- --------------------------- ---------------------------------------

<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
One Oxford Centre, Pittsburgh, Pennsylvania 15219.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Investment Adviser looks for prompt execution of the order at a
favorable price. In working with

dealers, the adviser will generally utilize those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. In selecting among firms believed to meet this
criteria, the adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by Federated
Securities Corp. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Board of Directors.

EXPENSES OF THE FUND AND FORTRESS SHARES

Holders of each class of shares pay their allocable portion of Fund and
Corporation expenses.

At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Services Plan and Distribution Plan. However, the
Directors reserve the right to allocate certain other expenses to holders of
Shares as it deems appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: distribution fees; transfer agent fees as identified by the
transfer agent as attributable to holders of Shares; fees under the Services
Plan; printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxies to current
shareholders; registration fees paid to the Securities and Exchange Commission
and registration fees paid to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
legal fees relating solely to Shares; and Directors' fees incurred as a result
of issues relating solely to Shares.

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

VOTING RIGHTS

Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Corporation have equal voting rights, except that only shares of
that particular Fund or class are entitled to vote in matters affecting that
Fund or class.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Fund:

- the Fund is subject to the Pennsylvania corporate franchise tax; and

- Fund Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

Class A Shares, the other class of shares offered by the Fund, are sold
primarily to customers of financial institutions with a maximum sales charge of
4.50%. Investments in Class A Shares are subject to a minimum initial investment
of $500, unless the investment is in a retirement account, in which case the
minimum investment is $50.

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises the total return for Fortress Shares.

The performance information reflects the effect of the maximum sales load and
other similar non-recurring charges, such as the contingent deferred sales
charge, which, if excluded, would increase the total return.

From time to time, the Fund may advertise the performance of Fortress Shares
using certain financial publications and/or compare its performance to certain
indices.

Total return will be calculated separately for Fortress Shares and Class A
Shares. Because Fortress Shares are subject to Rule 12b-1 fees, the total return
for Class A Shares, for the same period may exceed that of Fortress Shares.

ADDRESSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
World Utility Fund Federated Investors Tower
Fortress Shares Pittsburgh, Pennsylvania 15222-3779
- ----------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ----------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ----------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ----------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
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Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
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Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
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</TABLE>

WORLD UTILITY FUND

FORTRESS SHARES
PROSPECTUS

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

April 15, 1994

FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------------
Distributor

A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER

PITTSBURGH, PA 15222-3779

4021404A-FS (4/94)

WORLD UTILITY FUND

(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)

CLASS A SHARES
FORTRESS SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION

This Combined Statement of Additional Information should be read with the
respective prospectuses for Class A Shares and Fortress Shares of World Utility
Fund (the "Fund") dated April 15, 1994. This Combined Statement is not a
prospectus itself. To receive a copy of either prospectus, write or call the
Fund.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3776

Statement dated April 15, 1994

FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------

Distributor

A subsidiary of FEDERATED INVESTORS

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

GENERAL INFORMATION ABOUT THE FUND 1
- ----------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES 1
- ----------------------------------------------------------------

Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Repurchase Agreements 1
Lending Portfolio Securities 1
Portfolio Turnover 1
Investment Limitations 2

THE FUNDS 4
- ----------------------------------------------------------------

INVESTMENT ADVISORY SERVICES 4
- ----------------------------------------------------------------

Adviser to the Fund 4
Advisory Fees 5

ADMINISTRATIVE SERVICES 5
- ----------------------------------------------------------------

BROKERAGE TRANSACTIONS 5
- ----------------------------------------------------------------

PURCHASING SHARES 5
- ----------------------------------------------------------------

Distribution of Shares 5
Distribution and Shareholder Services Plans 5
Conversion to Federal Funds 6
Purchases by Sales Representatives, Directors
of the Corporation, and Employees 6

Exchanging Securities for Fund Shares 6

Tax Consequences 6

DETERMINING NET ASSET VALUE 6
- ----------------------------------------------------------------

Determining Market Value of Securities 7
Trading in Foreign Securities 7

EXCHANGE PRIVILEGE (FORTRESS SHARES ONLY) 7
- ----------------------------------------------------------------

Reduced Sales Charge 7
Requirements for Exchange 7
Tax Consequences 8
Making an Exchange 8

REDEEMING SHARES 8
- ----------------------------------------------------------------

Redemption in Kind 8

TAX STATUS 8
- ----------------------------------------------------------------

The Fund's Tax Status 8
Shareholders' Tax Status 9

TOTAL RETURN 9
- ----------------------------------------------------------------

YIELD 9
- ----------------------------------------------------------------

PERFORMANCE COMPARISONS 9
- ----------------------------------------------------------------

APPENDIX 11
- ----------------------------------------------------------------

GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------

The Fund is a portfolio in World Investment Series, Inc. (the "Corporation")
which was established as a corporation under the laws of the state of Maryland
on January 25, 1994.

Shares of the Fund are offered in two classes, known as Class A Shares and
Fortress Shares (individually and collectively referred to as "Shares," as the
context may require). This combined statement of additional information relates
to both classes of the above mentioned Shares.

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The Fund's investment objective is to provide total return.

TYPES OF INVESTMENTS

The Fund will seek to achieve its investment objective by investing at least 65%
of its total assets in securities issued by domestic and foreign companies in
the utilities industries. The Fund may also purchase fixed income securities and
foreign government securities; enter into forward commitments, repurchase
agreements, and, without limit, foreign currency transactions; and maintain
reserves in foreign or U.S. money market instruments.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
assets are marked to market daily and maintained until the transaction is
settled. As a matter of policy, the Fund does not intend to engage in
when-issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of its assets.

REPURCHASE AGREEMENTS

The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers which are deemed by the Fund's adviser or
sub-adviser to be creditworthy.

LENDING PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities to broker-dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker-dealers,
banks, or other institutions which the investment adviser or sub-adviser have
determined are creditworthy under guidelines established by the Corporation's
Board of Directors and will receive collateral equal to at least 100% of the
value of the securities loaned. The Fund does not intend to lend portfolio
securities in the current fiscal year.

The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.

PORTFOLIO TURNOVER

It is not anticipated that the portfolio trading engaged in by the Fund will
result in its annual rate of portfolio turnover exceeding 100%. The Fund's
Investment Adviser does not anticipate that portfolio turnover will result in
adverse tax consequences. However, relatively high portfolio turnover may result
in high transaction costs to the Fund.

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

INVESTMENT LIMITATIONS

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets except portfolio securities up
to one-third of the value of its total assets. This shall not prevent the
purchase or holding of corporate bonds, debentures, notes, certificates
of indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Fund's
investment objective and policies.

DIVERSIFICATION OF INVESTMENTS

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

CONCENTRATION OF INVESTMENTS

The Fund will not invest more than 25% of its total assets in securities
of issuers having their principal business activities in one industry,
except the utilities industry.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amount
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings exceed 5% of the value of its total assets are outstanding.

PLEDGING SECURITIES

The Fund will not mortgage, pledge, or hypothecate securities, except
when necessary for permissible borrowings. In those cases, it may pledge
assets having a value of 15% of its assets taken at cost.

BUYING ON MARGIN

The Fund will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for clearance of purchases and
sales of securities.

UNDERWRITING

The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.

INVESTING IN REAL ESTATE

The Fund will not invest in real estate or real estate limited
partnerships, although it may invest in securities secured by real estate
or interests in real estate or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase or sell
forward contracts with respect to foreign securities or currencies.

LENDING CASH OR SECURITIES

The Fund will not lend any assets except portfolio securities in an
amount up to one-third of the value of its total assets. This shall not
prevent the purchase or holding of bonds, debentures, notes, certificates
of indebtedness, or other debt securities of an issuer, repurchase
agreements or other transactions which are permitted by the Fund's
investment objective and policies or its Articles of Incorporation.

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

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

INVESTING IN MINERALS

The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs or leases, other than debentures or
equity stock interests.

PURCHASING SECURITIES TO EXERCISE CONTROL

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

INVESTING IN WARRANTS

The Fund will not invest more than 5% of its assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on recognized stock exchanges to
2% of its total assets. (If state restrictions change, this latter
restriction may be revised without notice to shareholders.) For purposes
of this investment restriction, warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund will not own more than 3% of the total outstanding voting stock
of any investment company, invest more than 5% of its total assets in any
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
closed-end investment companies only in open-market transactions
involving only customary broker's commissions. However, these limitations
are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets.

The Fund will limit its investment in other investment companies to those
with a sales charge of less than 1% that have investment objectives and
policies similar to its own. While it is the Fund's policy to waive its
investment advisory fee on assets invested in securities of open-end
investment companies, it should be noted that investment companies incur
certain expenses such as custodian and transfer agent fees, and,
therefore, any investment by the Fund in shares of another investment
company would be subject to such duplicate expenses.

INVESTING IN NEW ISSUERS

The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.

INVESTING IN ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including securities not determined by the Board of
Directors to be liquid, and repurchase agreements with maturities longer
than seven days after notice.

INVESTING IN RESTRICTED SECURITIES

The Fund will not invest more than 5% of its net assets in securities
subject to restriction on resale under federal securities law, except for
Section 4(2) commercial paper and other restricted securities deemed to
be liquid under criteria established by the Board of Directors.

PUTS AND CALLS

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's investment in put or call
options, straddles, spreads, or any combination thereof shall not exceed
5% of the Fund's total assets.

INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS OF
THE CORPORATION

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

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

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and individual
profits in excess of $100,000,000 at the time of investment to be "cash items."

The Fund does not intend to borrow money, pledge securities, or invest in
securities of other investment companies in excess of 5% of the value of its
total assets during the coming fiscal year. In addition, in order to comply with
investment restrictions of certain states, the Fund will not invest more than
10% of its total assets in the securities of one or more real estate investment
trusts.

The Fund reserves the right to convert to a master/feeder arrangement. The
Fund's portfolio may, notwithstanding any investment policy or limitation,
invest all of its assets in the securities of a single open-end management
investment company with substantially the same investment objectives, policies
and limitations as the Fund.

THE FUNDS
- --------------------------------------------------------------------------------

"The Funds" and "Funds" mean the following investment companies: A. T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; FT Series, Inc.; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal Trust; Federated Short-
Intermediate Government Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond
Fund; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Signet Select Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust For Government Cash Reserves; Trust for Short-Term
U.S. Government Securities; Trust for U.S. Treasury Obligations.

INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------

ADVISER TO THE FUND

The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his wife, and
his son, J. Christopher Donahue. John F. Donahue, is Chairman and Trustee,
Federated Management, Chairman and Trustee, Federated Investors, and Chairman
and Director of the Corporation. John A. Staley, IV, is President and Trustee,
Federated Management, Vice President and Trustee, Federated Investors, Executive
Vice President, Federated Securities Corp., and Vice President of the
Corporation. J. Christopher Donahue, is Trustee, Federated Management, President
and Trustee, Federated Investors, President and Director, Federated
Administrative Services, and Vice President of the Corporation. John W.
McGonigle, is Vice President, Secretary, and Trustee, Federated Management, Vice
President, Secretary, General Counsel, and Trustee, Federated Investors,
Executive Vice President, Secretary, and Director, Federated Administrative
Services, Executive Vice President and Director, Federated Securities Corp., and
Vice President and Secretary of the Corporation.

The adviser shall not be liable to the Fund, the Corporation or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Corporation.

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

ADVISORY FEES

For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.

STATE EXPENSE LIMITATION

The adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.

If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any fiscal year, by the amount of the in investment
advisory fee.

This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.

ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------

Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. John A. Staley, IV, an officer of the Corporation and Dr. Henry J.
Gailliot, an officer of Federated Management, the adviser to the Fund, each hold
approximately 15% and 20%, respectively, of the outstanding common stock and
serve as directors of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services.

BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------

The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:

- - advice as to the advisability of investing in securities;

- - security analysis and reports;

- - economic studies;

- - industry studies;

- - receipt of quotations for portfolio evaluations; and

- - similar services.

The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such person are reasonable in relationship to the value of the brokerage and
research services provided.

Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.

PURCHASING SHARES
- --------------------------------------------------------------------------------

Except under certain circumstances described in the prospectus, Shares are sold
at their net asset value plus a sales charge on days the New York Stock Exchange
is open for business. The procedure for purchasing Shares is explained in the
respective prospectus under "Investing in Class A Shares" or "Investing in
Fortress Shares."

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for Shares of the Fund.

DISTRIBUTION AND SHAREHOLDER SERVICES PLANS

These arrangements permit the payment of fees to Financial Institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but

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

are not limited to, marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and other
personnel as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine client
inquiries; and assisting clients in changing dividend options, account
designations, and addresses.

With respect to Fortress Shares of the Fund, by adopting the Distribution Plan,
the Board of Directors expects that the Fund will be able to achieve a more
predictable flow of cash for investment purposes and to meet redemptions. This
will facilitate more efficient portfolio management and assist the Fund in
pursuing its investment objectives. By identifying potential investors whose
needs are served by the Fund's objectives, and properly servicing these
accounts, it may be possible to curb sharp fluctuations in rates of redemptions
and sales.

Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; and (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.

CONVERSION TO FEDERAL FUNDS

It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. State Street Bank acts as the shareholder's agent in depositing
checks and converting them to federal funds.

PURCHASES BY SALES REPRESENTATIVES, DIRECTORS OF THE CORPORATION, AND EMPLOYEES

Directors, employees, and sales representatives of the Fund, Federated
Management, and Federated Securities Corp. or their affiliates, or any
investment dealer who has a sales agreement with Federated Securities Corp., and
their spouses and children under 21, may buy Shares at net asset value without a
sales charge or redemption fees. Shares may also be sold without a sales charge
to trusts or pension or profit-sharing plans for these persons.

These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.

EXCHANGING SECURITIES FOR FUND SHARES

Investors may exchange securities they already own for Shares, or they may
exchange a combination of securities and cash for Shares. Any securities to be
exchanged must meet the investment objective and policies of the Fund, must have
readily ascertainable market value, must be liquid, and must not be subject to
restrictions on resale.

The Fund will prepare a list of securities which are eligible for acceptance and
furnish this list to brokers upon request. The Fund reserves the right to reject
any security, even though it appears on the list, and the right to amend the
list of acceptable securities at any time without notice to brokers or
investors.

An investment broker acting for an investor should forward the securities in
negotiable form with an authorized letter of transmittal to Federated Securities
Corp. Federated Securities Corp. will determine that transmittal papers are in
good order and forward to the Fund's custodian, State Street Bank. The Fund will
notify the broker of its acceptance and valuation of the securities within five
business days of their receipt by State Street Bank.

The Fund values such securities in the same manner as the Fund values its
portfolio securities. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One Share will be issued
for each equivalent amount of securities accepted.

Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion, or
other rights attached to the securities become the property of the Fund, along
with the securities.

TAX CONSEQUENCES

Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Shares,
a gain or loss may be realized by the investor.

DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------

Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the respective prospectuses.

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

DETERMINING MARKET VALUE OF SECURITIES

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

- - according to the last reported sale price on a recognized securities exchange,
if available. (If a security is traded on more than one exchange, the price on
the primary market for that security, as determined by the adviser, is used.);

- - according to the last reported bid price, if no sale on the recognized
exchange is reported or if the security is traded over-the-counter;

- - at fair value as determined in good faith by the Corporation's Board of
Directors; or

- - for short-term obligations with remaining maturities of less than 60 days at
the time of purchase, at amortized cost, which approximates value.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities; yield; quality; coupon rate; maturity; type of
issue; trading characteristics; and other market data.

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Board of Directors, although the actual calculation may be
done by others.

EXCHANGE PRIVILEGE (FORTRESS SHARES ONLY)
- --------------------------------------------------------------------------------

This section relates only to Fortress Shares of the Fund. For information
regarding the Exchange Privilege for Class A Shares of the Fund, please see the
prospectus for Class A Shares.

The Securities and Exchange Commission has issued an order exempting the Fund
from certain provisions of the Investment Company Act of 1940. As a result, Fund
shareholders are allowed to exchange all or some of their shares for shares in
other Fortress Funds or certain Federated Funds which are sold with a sales
charge different from that of the fund or with no sales charge and which are
advised by subsidiaries or affiliates of Federated Investors. These exchanges
are made at net asset value plus the difference between the Fund's sales charge
already paid and any sales charge of the fund into which the Shares are to be
exchanged, if higher.

The order also allows certain other funds, including funds that are not advised
by subsidiaries or affiliates of Federated Investors, which do not have a sales
charge, to exchange their shares for Shares on a basis other than the current
offering price. These exchanges may be made to the extent that such shares were
acquired in a prior exchange, at net asset value, for shares of a Federated Fund
carrying a sales charge.

REDUCED SALES CHARGE

If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp.

REQUIREMENTS FOR EXCHANGE

This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund.

Further information on the exchange privilege and prospectuses for Fortress
Funds or certain Federated Funds are available by calling the Fund.

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

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

Instructions for exchanges for Fortress Funds or certain Federated Funds may be
given in writing or by telephone. Written instructions may require a signature
guarantee.

REDEEMING SHARES
- --------------------------------------------------------------------------------

The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
respective prospectuses under "Redeeming Class A Shares" and "Redeeming Fortress
Shares." Although the transfer agent does not charge for telephone redemptions,
it reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $5,000.

Since portfolio securities of the Fund may be traded on foreign exchanges which
trade on Saturdays or on holidays on which the Fund will not make redemptions,
the net asset value each class of Shares of the Fund may be significantly
affected on days when shareholders do not have an opportunity to redeem their
Shares.

Fortress Shares redeemed within one to four years of purchase may be subject to
a contingent deferred sales charge. The amount of the contingent deferred sales
charge is based upon the amount of the administrative fee paid at the time of
purchase by the distributor to the financial institution for services rendered,
and the length of time the investor remains a shareholder in the Fund. Should
financial institutions elect to receive an amount less than the administrative
fee that is stated in the prospectus for servicing a particular shareholder, the
contingent deferred sales charge and/or holding period for that particular
shareholder will be reduced accordingly.

REDEMPTION IN KIND

Although the Corporation intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.

Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Directors determine to be fair and equitable.

The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940 under which the Corporation is obligated to redeem Shares
for any one shareholder in cash only up to the lesser of $250,000 or 1% of the
Corporation's net asset value during any 90-day period.

TAX STATUS
- --------------------------------------------------------------------------------

THE FUND'S TAX STATUS

The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:

- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;

- - derive less than 30% of its gross income from the sale of securities held less
than three months;

- - invest in securities within certain statutory limits; and

- - distribute to its shareholders at least 90% of its net income earned during
the year.

However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company (PFIC). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.

UNITED KINGDOM TAXES

The adviser currently understands that an investment company such as the
Fund is not taxable under the laws of the United Kingdom as long as the
adviser follows certain operating procedures. To comply with these
procedures, the adviser will make all investment decisions for the Fund
and execute all portfolio transactions outside the United Kingdom.

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

SHAREHOLDERS' TAX STATUS

Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.

CAPITAL GAINS

Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
the Fund Shares.

TOTAL RETURN
- --------------------------------------------------------------------------------

The average annual total return for both classes of shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the net asset value per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any applicable sales
load, adjusted over the period by any additional Shares, assuming the annual
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investment based
on the lesser of the original purchase price or the net asset value of Shares
redeemed. Occasionally, total return which does not reflect the effect of the
sales load may be quoted in advertising.

YIELD
- --------------------------------------------------------------------------------

The yield for both classes of Shares of the Fund is determined each day by
dividing the net investment income per share (as defined by the Securities and
Exchange Commission) earned by either class of Shares over a thirty-day period
by the maximum offering price per share of the respective class on the last day
of the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over 12-month period and is reinvested every
six months. The yield does not necessarily reflect income actually earned by the
Fund because of certain adjustments required by the Securities and Exchange
Commission and therefore, may not correlate to the dividends or other
distributions paid to the shareholders.

To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of Shares, the performance will be reduced for those shareholders paying
those fees.

PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------

The Fund's performance of both classes of Shares depends upon such variables as:

- - portfolio quality;

- - average portfolio maturity;

- - type of instruments in which the portfolio is invested;

- - changes in interest rates on money market instruments;

- - changes in the Fund's or either class of Shares' expenses; and

- - various other factors.

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio comparisons of other funds, and methods
used to value portfolio securities and compute net asset value. The financial
publications and/or indices which the Fund uses in advertising may include:

- - 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 specific period of time.

- - EUROPE, AUSTRALIA, AND FAR EAST (EAFE) is a market capitalization weighted
foreign securities index, which is widely used to measure the performance of
European, Australian, New Zealand and Far Eastern stock markets. The index
covers approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars and local
currency and calculates total returns monthly. EAFE U.S. dollar total return
is a net dividend figure less Luxembourg withholding tax. The EAFE is
monitored by Capital International, S.A., Geneva, Switzerland.

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

- - STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the Standard
& Poor's index assumes reinvestments of all dividends paid by stocks listed on
its index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in Standard & Poor's figures.

- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDQ-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.

- - DOW JONES COMPOSITE AVERAGE or its component averages--an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones Industrial
Average), 15 utilities company stocks (Dow Jones Utilities Average), and 20
transportation company stocks. Comparisons of performance assume reinvestment
of dividends.

- - DOW JONES WORLD INDUSTRY INDEX or its component indices, including, among
others, the utility sector.

- - STANDARD & POOR'S 500 STOCK INDEX or its component indices--an unmanaged index
composed of 400 industrial stocks, 40 financial stocks, 40 utilities stocks,
and 20 transportation stocks. Comparisons of performance assume reinvestment
of dividends.

- - THE NEW YORK STOCK EXCHANGE composite or component indices--unmanaged indices
of all industrial, utilities, transportation, and finance stocks listed on the
New York Stock Exchange.

- - FINANCIAL TIMES ACTUARIES INDICES--including the FTA-World Index (and
components thereof), which are based on stocks in major world equity markets.

- - LIPPER-MUTUAL FUND PERFORMANCE ANALYSIS AND LIPPER-FIXED INCOME FUND
PERFORMANCE ANALYSIS--measure of total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestment of all distributions, exclusive
of any applicable sales charges.

- - VALUE LINE MUTUAL FUND SURVEY, published by Value Line Publishing,
Inc.--analyzes price, yield, risk, and total return for equity and fixed
income mutual funds.

- - MUTUAL FUND SOURCE BOOK, published by Morningstar, Inc.--analyzes price,
yield, risk, and total return for equity and fixed income funds.

- - CDA MUTUAL FUND REPORT, published by CDA Investment Technologies,
Inc.--analyzes price, current yield, risk, total return, and average rate of
return (average annual compounded growth rate) over specified time periods for
the mutual fund industry.

- - VALUE LINE INDEX--an unmanaged index which follows the stocks of approximately
1,700 companies.

- - WILSHIRE 5000 EQUITY INDEX--represents the return on the market value of all
common equity securities for which daily pricing is available. Comparisons of
performance assume reinvestment of dividends.

- - HISTORICAL DATA supplied by the research departments of First Boston
Corporation, the J. P. Morgan companies, Salomon Brothers, Merrill Lynch,
Pierce, Fenner & Smith, Smith Barney Shearson and Bloomberg L.P.

- - FINANCIAL PUBLICATIONS: The Wall Street Journal, Business Week, Changing
Times, Financial World, Forbes, Fortune and Money magazines, among
others--provide performance statistics over specified time periods.

- - MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDICES, including, among others,
the Morgan Stanley Capital International Europe, Australia, Far East Index
("EAFE Index"). The EAFE index is an unmanaged index of more than 1,000
companies of Europe, Australia and the Far East.

- - CONSUMER PRICE INDEX (OR COST OF LIVING INDEX), published by the U.S. Bureau
of Labor Statistics--a statistical measure of change, over time, in the price
of goods and services in major expenditure groups.

Advertisements and sales literature for both classes of shares may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
either class of shares based on annual reinvestment of dividends over a
specified period of time.

Advertisements may quote performance information which does reflect the effect
of the sales load.

APPENDIX
- --------------------------------------------------------------------------------

STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S") CORPORATE BOND RATINGS
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 protections
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, B, CCC--Debt rated BB, B, and CCC is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, they are outweighed by
large uncertainties of major risk exposures to adverse conditions.

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE BOND RATINGS

AAA--Bonds which are rated Aaa are judged to be of best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations 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
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 rated Ba are judged top 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.

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

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

MOODY'S COMMERCIAL PAPER RATINGS

P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earning coverage of fixed financial changes
and high internal cash generation; well-established access to a range of
financial markets and assured sources of alternate liquidity.

4021404B (4/94)