WORLD INVESTMENT SERIES INC, 497, 1996-08-01

WORLD INVESTMENT SERIES INC
497, 1996-08-01

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FEDERATED ASIA PACIFIC GROWTH FUND

(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)

CLASS A SHARES

SEMI-ANNUAL REPORT AND SUPPLEMENT TO THE PROSPECTUS DATED JANUARY 31, 1996

A. Please delete the third and fourth sentence of the fourth paragraph on
the cover page of the prospectus and replace it with the following:

"You may request a copy of the Statement of Additional information, or a
paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain other
information or to make inquiries about the Fund, contact your financial
institution. The Statement of Additional Information, material incorporated
by reference into this document, and other information regarding the Fund is
maintained electronically with the SEC at Internet Web site
(http://www.sec.gov)."

B. Please insert the following "Financial Highlights" table for Class A
Shares immediately following the "Summary of Fund Expenses" tables in the
prospectus:

FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>

PERIOD ENDED
(UNAUDITED)
MAY 31, 1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net realized and unrealized gain (loss) on investments and foreign currency 0.59
NET ASSET VALUE, END OF PERIOD $10.59
TOTAL RETURN(B) 5.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.85%*
Net investment income 0.12%*
Expense waiver/reimbursement(c) 8.64%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $4,624
Average commission rate paid $0.0095
Portfolio turnover 37%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to May 31, 1996.

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

(See Notes which are an integral part of the Financial Statements)

C. Please delete the final sentence of the section entitled "Making an
Exchange" on page 19 of the prospectus and replace it with the following:

"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 Shareholder Services Company, 1099
Hingham Street, Rockland, MA 02370-3317."

D. Please add the following as the fourth sentence of the section entitled
"How to Redeem Shares" on page 20 of the prospectus:

"Investors who redeem shares through a financial institution may be charged
a service fee by that institution."

E. Under the section entitled "Administrative Services" on page 27 of the
prospectus, please delete all references to "Federated Administrative
Services" and replace them with "Federated Services Company."
F. Please add the following as the last sentence of the first paragraph of
the section entitled "Voting Rights" on page 28 of the prospectus:

"As of July 5, 1996, Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL,
owned 44.97% of the voting securities of the Fund's Class C Shares, and,
therefore, may, for certain purposes, be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders."

G. Please insert the following financial statements beginning on page 31 of
the prospectus, immediately before the section entitled "Appendix."

FEDERATED ASIA PACIFIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--86.4%
APPLIANCES & HOUSEHOLD DURABLES--0.3%
4,000 Tigaraksa Satria $ 19,893
AUTOMOBILE--1.0%
4,000 Cycle & Carriage Ltd. 42,031
1,400 (a)(b)Mahindra and Mahindra, GDR 15,400
Total 57,431
BANKING--3.6%
3,600 HSBC Holdings PLC 54,437
1,000 Kookmin Bank 19,544
4,200 Krung Thai Bank PLC 21,393
800 (a)Philippine Commercial International Bank 10,313
5,000 Sumitomo Trust & Banking 69,444
4,000 United Overseas Bank Ltd. 36,351
Total 211,482
BROADCASTING & PUBLISHING--1.8%
21,100 Austereo Ltd. 34,356
5,600 News Corp., Ltd. 31,421
2,000 Singapore Press Holdings Ltd. 37,487
Total 103,264
BUILDING MATERIALS & COMPONENTS--0.8%
3,000 PT Semen Gresik 9,936
10,800 Pioneer International Ltd. 33,101
Total 43,037
</TABLE>

FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
BUSINESS & PUBLIC SERVICES--2.7%
4,000 Dai Nippon Printing Co., Ltd. $ 74,074
3,000 Kokuyo 80,278
Total 154,352
CHEMICALS--1.3%
4,000 Dainippon Ink and Chemicals, Inc. 19,556
10,000 Nippon Zeon Co. 60,370
Total 79,926
CONSTRUCTION & HOUSING--5.0%
16,000 Ekran Bhd 60,244
4,000 Maeda Road Construction 67,037
7,000 Nichiei Construction 81,019
7,000 Nippon Comsys Corp. 89,444
Total 297,744
ELECTRICAL & ELECTRONICS--7.3%
7,000 Canon Copyer Sales 89,444
6,000 Japan Radio 84,444
10,000 Mitsubishi Electric Corp. 68,519
3,000 Nitto Denko Corp. 49,167
12,000 Sanyo Electric 71,444
10,000 Toshiba Corp. 69,537
Total 432,555
ELECTRONIC COMPONENTS, INSTRUMENTS--5.2%
3,300 Hana Microelectronics Co., Ltd. 20,588
12,000 Malaysian Pacific Industries 49,509
5,000 Nihon Kaiheiki Industry 82,407
</TABLE>

FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
ELECTRONIC COMPONENTS, INSTRUMENTS--CONTINUED
2,000 Noritsu Koki Co., Ltd. $ 88,889
4,000 Yamatake-Honeywell 71,481
Total 312,874
ENERGY EQUIPMENT & SERVICES--0.7%
2,000 (a)(b)Bombay Suburban Electric Supply, GDR 39,000
ENERGY SOURCES--1.1%
130 (a)Hub Power Co., GDR 3,315
1,700 (a)PTT Exploration and Production Public Co. 25,373
5,800 Woodside Petroleum Ltd. 33,192
Total 61,880
FINANCIAL SERVICES--6.1%
1,500 Dongsuh Securities Co. 24,557
5,800 (a)Industrial Finance Corporation of Thailand 26,108
8,000 Jaccs 72,519
3,000 Nomura Securities Co., Ltd. 56,667
26,000 Public Bank Bhd 70,298
23,000 TA Enterprise Berhad 35,746
9,000 Wako Securities Co., Ltd. 74,000
Total 359,895
FOOD & HOUSEHOLD PRODUCTS--1.3%
32,000 (a)(b)Want Want Holdings 74,560
FOREST PRODUCTS & PAPER--0.1%
8,000 Pab K Tjiwi Kimia 8,489
GOLD MINES--0.6%
12,700 (a)Delta Gold NL 34,464
HEALTH & PERSONAL CARE--2.4%
4,000 Kyowa Hakko Kogyo Co. 39,259
</TABLE>

FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
HEALTH & PERSONAL CARE--CONTINUED
38,100 (a)Marsman & Company $ 20,374
83,100 Metro Pacific Corp. 22,219
50,000 (a)(b)Shanghai Industrial Holdings Ltd. 60,745
Total 142,597
INDUSTRIAL COMPONENTS--0.6%
2,000 Bridgestone Corp. 34,815
INSURANCE--1.3%
6,000 Tokio Marine and Fire Insurance Co. 77,778
LEISURE & TOURISM--0.5%
20,000 (a)Sydney Harbour Casino Holdings, Inc. 30,170
MACHINERY & ENGINEERING--11.3%
2,000 Chodai Co., Ltd 71,667
7,000 Far East Levingston Shipbuilding Ltd. 42,244
7,000 JGC Corp. 89,444
1,000 (b)Larsen & Toubro Ltd., GDR 20,000
9,000 Mitsubishi Heavy Industries Ltd. 77,417
17,000 (a)Nachi Fujikoshi Corp. 82,009
4,000 Nihon Denkei Co., Ltd 75,926
2,200 Nitto Kohki Co., Ltd. 92,685
7,000 Toyoda Machine Works 77,778
9,000 Westmont Industries Berhad 16,151
12,600 (a)Westmont Industries Berhad, Class A 21,198
Total 666,519
MERCHANDISING--5.9%
3,000 Chain Store Okuwa Co., Ltd. 52,500
60,000 Goldlion Holdings Ltd. 49,242
7,000 Matsuzakaya Co., Ltd. 87,500
5,000 Nichii Co., Ltd. 79,167
</TABLE>

FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
MERCHANDISING--CONTINUED
1,000 PT Hero Supermarket $ 1,008
5,000 Takashimaya 81,481
Total 350,898
METALS - NON FERROUS--0.2%
300 (a)(b)Hindalco Industries Ltd., GDR 13,350
METALS - STEEL--1.5%
27,000 (a)NKK Corp. 79,000
1,000 (a)(b)Steel Authority of India, GDR 14,250
Total 93,250
MINING--0.1%
4,000 Tambang Timah 7,889
MISCELLANEOUS MATERIALS & COMMODITIES--4.6%
16,000 Nippon Sheet Glass Co. 76,593
4,400 Sanyo Pax Co., Ltd 97,370
208,000 Sinocan Holdings Ltd. 100,138
Total 274,101
MULTI-INDUSTRY--2.1%
93,500 Aboitiz Equity Ventures, Inc. 18,929
13,500 Pacific Dunlop Ltd. 29,200
26,000 Renong Berhad 43,325
3,250 (a)Renong Berhad, Warrants 709
12,900 Southcorp Holdings Ltd. 33,153
Total 125,316
REAL ESTATE--7.6%
11,000 Cheung Kong 81,391
5,000 City Developments 38,339
23,000 Eastern and Oriental Berhad 48,828
64,050 (a)Filinvest Land, Inc. 25,689
</TABLE>

FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
REAL ESTATE--CONTINUED
22,000 Hotel Properties Ltd. $ 38,892
2,100 Lend Lease Corp., Ltd. 32,852
24,000 PT Pakuwon Jati 9,260
12,000 Parkway Holdings Ltd. 34,931
6,000 Sun Hung Kai Properties 61,262
12,000 Tokyo Tatemono Co., Ltd. 75,444
Total 446,888
TELECOMMUNICATIONS--1.8%
1,100 Advanced Information Services 18,155
13,000 (a)Technology Resources Industries Bhd 43,221
11,000 Telecom Corp. of New Zealand 44,715
Total 106,091
TEXTILES & APPAREL--1.6%
12,000 PT Great River Industries 13,376
20,000 Renown Inc. 82,222
Total 95,598
TRANSPORTATION - ROAD & RAIL--1.8%
3,150 (a)Guangshen Railway Co., Ltd., Class H, ADR 62,213
7,000 PT Citra Marga Nusaphala Persada 11,404
20,000 PT Steady Safe 28,725
Total 102,342
UTILITIES - ELECTRICAL & GAS--0.9%
12,000 Tenaga Nasional Berhad 50,951
</TABLE>

FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>

SHARES VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
WHOLESALE & INTERNATIONAL TRADE--3.3%
600 (a)Doshisha Co., Ltd. $ 18,889
2,600 Iuchi Seiedo Co., Ltd. 102,315
14,000 Marubeni Corp. 76,352
Total 197,556
TOTAL COMMON STOCKS (IDENTIFIED COST $4,806,350) 5,106,955
(C)REPURCHASE AGREEMENT--11.7%
$ 690,000 BT Securities Corporation, 5.34%, dated 5/31/1996, due 6/3/1996
(AT AMORTIZED COST) 690,000
TOTAL INVESTMENTS (IDENTIFIED COST $5,496,350)(D) $ 5,796,955
</TABLE>

(a) Non-income producing security.

(b) Denotes a restricted security which is subject to restrictions on resale
under securities laws. At May 31, 1996, these securities amounted to
$237,305 which represents 4.0% of net assets.

(c) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.

(d) The cost of investments for federal tax purposes amounts to $5,496,350.
The net unrealized appreciation of investments on a federal tax basis
amounts to $300,605 which is comprised of $390,159 appreciation and $89,554
depreciation at May 31, 1996.

Note: The categories of investments are shown as a percentage of net assets
($5,908,566) at May 31, 1996.

The following acronyms are used throughout this portfolio:

ADR -- American Depository Receipts

GDR -- Global Depository Receipts

LTD -- Limited

PLC -- Public Limited Company

(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investment in repurchase agreement $ 690,000
Investments in securities 5,106,955
Total investments in securities, at value (identified and tax cost
$5,496,350) $5,796,955
Cash denominated in foreign currencies (identified cost $719) 721
Cash 18,794
Income receivable 18,405
Receivable for investments sold 24,012
Receivable for shares sold 92,093
Total assets 5,950,980
LIABILITIES:
Payable for investments purchased 21,462
Payable for foreign taxes withheld 2,532
Accrued expenses 18,420
Total liabilities 42,414
NET ASSETS for 558,109 shares outstanding $5,908,566
NET ASSETS CONSIST OF:
Paid in capital $5,609,638
Net unrealized appreciation of investments and translation of
assets and
liabilities in foreign currency 300,463
Accumulated net realized loss on investments and foreign currency
transactions (1,628)
Undistributed net investment income 93
Total Net Assets $5,908,566
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($4,624,235 O 436,631 shares outstanding) $10.59
Offering Price Per Share (100/94.50 of $10.59)* $11.21
Redemption Proceeds Per Share $10.59
CLASS B SHARES:
Net Asset Value Per Share ($956,731 O 90,494 shares outstanding) $10.57
Offering Price Per Share $10.57
Redemption Proceeds Per Share (94.50/100 of $10.57)** $9.99
CLASS C SHARES:
Net Asset Value Per Share ($327,600 O 30,984 shares outstanding) $10.57
Offering Price Per Share $10.57
Redemption Proceeds Per Share (99.00/100 of $10.57)** $10.46
</TABLE>

* See "How to Purchase Shares" in the Prospectus.

** See "Contingent Deferred Sales Charge" in the
Prospectus.
(See Notes which are an integral part of the Financial Statements)

FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1996 (UNAUDITED)(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $2,909) $ 23,407
Interest (net of foreign taxes withheld of $1,924) 2,588
Total income 25,995
EXPENSES:
Investment advisory fee $ 13,456
Administrative personnel and services fee 48,524
Custodian fees 34,795
Transfer and dividend disbursing agent fees and expenses 6,907
Legal fees 2,911
Portfolio accounting fees 20,631
Distribution services fee -- Class B Shares 718
Distribution services fee -- Class C Shares 232
Shareholder services fee -- Class A Shares 3,047
Shareholder services fee -- Class B Shares 239
Shareholder services fee -- Class C Shares 77
Share registration costs 2,154
Printing and postage 5,019
Insurance premiums 1,723
Miscellaneous 1,723
Total expenses 142,156
Waivers and reimbursements --
Waiver of investment advisory fee $ (13,456)
Reimbursement of other operating expenses (102,798)
Total waivers and reimbursements (116,254)
Net expenses 25,902
Net investment income 93
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized loss on investments and foreign
currency transactions (1,628)
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 300,463
Net realized and unrealized gain on investments and
foreign currency 298,835
Change in net assets resulting from operations $298,928
</TABLE>

(a) For the period from February 28, 1996 (date of initial
public investment) to May 31, 1996.
(See Notes which are an integral part of the Financial Statements)

FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

PERIOD ENDED
(UNAUDITED)
MAY 31, 1996(A)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 93
Net realized gain (loss) on investments and foreign currency
transactions ($1,628 net loss, as computed for federal tax
purposes) (1,628)
Net change in unrealized appreciation (depreciation) of
investments and translation of assets and liabilities
in foreign currency 300,463
Change in net assets resulting from operations 298,928
SHARE TRANSACTIONS--
Proceeds from sale of shares 11,167,518
Cost of shares redeemed (5,557,880)
Change in net assets resulting from share transactions 5,609,638
Change in net assets 5,908,566
NET ASSETS:
Beginning of period --
End of period (including undistributed net investment income of
$93) $ 5,908,566
</TABLE>

(a) For the period from February 28, 1996 (date of initial public
investment) to May 31, 1996.

(See Notes which are an integral part of the Financial Statements)

FEDERATED ASIA PACIFIC GROWTH FUND
NOTES TO FINANCIAL STATEMENTS

MAY 31, 1996 (UNAUDITED)

1. ORGANIZATION

World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of six portfolios.
The financial statements included herein are only those of Federated Asia
Pacific Growth Fund (the "Fund"), a diversified portfolio. The financial
statements of the other portfolios are presented separately. The assets of
each portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The Fund seeks to provide long-term
growth of capital.

The Fund offers three classes of shares: Class A Shares, Class B Shares and
Class C Shares.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- Foreign equity securities are valued at the last
sale price reported on a national securities exchange or the
over-the-counter market. In the absence of recorded sales for equity
securities they are recorded at the last reported bid price. Short-term
domestic and foreign securities are valued at the prices provided by an
independent pricing service. However, short-term domestic and foreign
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value.

REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System, or to have segregated within the custodian bank's
vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.

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 to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral securities.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the "Code").
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Certain dividends from foreign securities may be recorded
after the ex-dividend date based upon when information becomes available to
the Fund.

FEDERATED ASIA PACIFIC GROWTH FUND

FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. However, federal taxes may be
imposed on the Fund upon the disposition of certain investments in passive
foreign investment companies. Withholding taxes on foreign interest and
dividends have been provided for in accordance with the Fund's understanding
of the applicable country's tax rules and rates.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.

CONCENTRATION OF CREDIT RISK -- The Fund invests in securities of non-U.S.
issuers. Although the Fund maintains a diversified investment portfolio, the
political or economic developments within a particular country or region may
have an adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have an
effect on the liquidity and volatility of portfolio securities and currency
holdings.

At May 31, 1996, the diversification by country was as follows:
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS COUNTRY % OF NET ASSETS
<S> <C> <S> <C>
Australia 4.9 Malaysia 7.4
China 2.5 New Zealand 0.8
Hong Kong 5.2 Pakistan 0.2
India 1.7 Philippines 1.6
Indonesia 1.9 Singapore 4.6
Japan 51.6 Taiwan 1.3
Korea 0.8 Thailand 1.9
</TABLE>

FOREIGN EXCHANGE CONTRACTS -- The Fund may enter into foreign currency
exchange contracts as a way of managing foreign exchange rate risk. The Fund
may enter into these contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date as a hedge or cross hedge
against either specific transactions or portfolio positions. The objective
of the Fund's foreign currency hedging transactions is to reduce the risk
that the U.S. dollar value of the Fund's foreign currency denominated
securities will decline in value due to changes in foreign currency exchange
rates. All foreign currency exchange contracts are "marked to market" daily
at the applicable translation rates resulting in unrealized gains or losses.
Realized gains or losses are recorded at the time the foreign currency
exchange contract is offset by entering into a closing transaction or by the
delivery or receipt of the currency. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. As of May 31, 1996, the Fund
had no foreign exchange contracts outstanding.

FEDERATED ASIA PACIFIC GROWTH FUND

FOREIGN CURRENCY TRANSLATION -- The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the rate
of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.

Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in
the value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate.

RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities
has agreed to register such securities for resale, at the issuer's expense
either upon demand by the Fund or in connection with another registered
offering of the securities. Many restricted securities may be resold in the
secondary market in transactions exempt from registration. Such restricted
securities may be determined to be liquid under criteria established by the
Directors. The Fund will not incur any registration costs upon such resales.
The Fund's restricted securities are valued at the price provided by dealers
in the secondary market or, if no market prices are available, at the fair
value as determined by the Fund's pricing committee.

Additional information on each restricted security held at May 31, 1996 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Mahindra and Mahindra, GDR 2/26/96 $12,250
Bombay Suburban Electric Supply, GDR 2/29/96 20,640
Want Want Holdings 5/16/96 55,860
Shanghai Industrial Holdings Ltd. 5/23/96 47,537
Larsen & Toubro Ltd., GDR 3/1/96 15,350
Hindalco Industries Ltd., GDR 2/26/96 11,025
Steel Authority of India, GDR 3/6/96 12,975
</TABLE>

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.

OTHER -- Investment transactions are accounted for on the trade date.

FEDERATED ASIA PACIFIC GROWTH FUND

3. CAPITAL STOCK
At May 31, 1996, par value shares ($ 0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
# OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 150,000,000
Class B Shares 150,000,000
Class C Shares 150,000,000
Total 450,000,000
</TABLE>

Transactions in capital stock were as follows:
<TABLE>
<CAPTION>

PERIOD ENDED
MAY 31, 1996(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 950,749 $ 9,775,242
Shares redeemed (514,118) (5,440,116)
Net change resulting from Class A share transactions 436,631 $ 4,335,126
</TABLE>

PERIOD ENDED
MAY 31, 1996(B)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 94,734 $ 994,875
Shares redeemed (4,240) (44,811)
Net change resulting from Class B share transactions 90,494 $ 950,064
</TABLE>

PERIOD ENDED
MAY 31, 1996(B)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 37,764 $ 397,401
Shares redeemed (6,780) (72,953)
Net change resulting from Class C share transactions 30,984 $ 324,448
Net change resulting from share transactions 558,109 $ 5,609,638
</TABLE>

(a) For the period from February 28, 1996 (date of initial public
investment) to May 31, 1996.

(b) For the period from February 28, 1996 (date of initial public offering)
to May 31, 1996.

FEDERATED ASIA PACIFIC GROWTH FUND

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser, (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.10% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its fee
and reimburse certain operating expenses of the Fund. The Adviser can modify
or terminate this voluntary waiver and reimbursement at any time at its sole
discretion.

ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.

% OF AVG. DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>

Class A shares did not incur a Distribution services fee for the period
ended May 31, 1996, and has no present intention of paying or accruing a
Distribution services fee.

SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to 0.25% of average daily net assets of the Fund for the period. The fee
paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.

PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.

FEDERATED ASIA PACIFIC GROWTH FUND

ORGANIZATIONAL EXPENSES -- Organizational expenses of $48,248 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five-year period following the Fund's
effective date. For the period ended May 31, 1996, no payments were made by
the Fund pursuant to this agreement.

GENERAL -- Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $6,226,838
SALES $1,428,037
</TABLE>

<TABLE>
<S> <S>
DIRECTORS OFFICERS
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Richard B. Fisher Edward C. Gonzales
Edward L. Flaherty, Jr. Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts J. Crilley Kelly
Assistant Secretary
</TABLE>

Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.

This report is authorized for distribution to prospective investors only
when preceded or accompanied by the Fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses, and other
information.

[This Page Intentionally Left Blank]

FEDERATED
ASIA PACIFIC
GROWTH
FUND
CLASS A SHARES

SEMI-ANNUAL REPORT AND
SUPPLEMENT TO PROSPECTUS
DATED JANUARY 31, 1996

[Graphic]
Federated Investors
Since 1955
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.

[Graphic]

Cusip 981487507
G01739-02 (7/96)

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

FEDERATED ASIA PACIFIC GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
PROSPECTUS

The Class A Shares of Federated Asia Pacific Growth Fund (the "Fund") represent
interests in a diversified portfolio of World Investment Series, Inc. (the
"Corporation"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to provide long-term growth of capital. Any
income received from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in equity securities of Asian and
Pacific Rim companies.

THE CLASS A 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 CLASS A SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, and Class C Shares dated January 31, 1996, with the
Securities and Exchange Commission. The information contained in the Statement
of Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Statement of Additional Information or a paper copy of
this prospectus, if you have received your prospectus electronically, free of
charge by calling 1-800-235-4669. To obtain other information or to 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 January 31, 1996

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

TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1

General Information............................................................2

Investment Information.........................................................3
Investment Objective.........................................................3
Investment Policies..........................................................3
Investment Limitations......................................................13

Net Asset Value...............................................................14

How to Purchase Shares........................................................15

What Shares Cost............................................................15

Special Purchase Features...................................................18

Exchange Privilege............................................................19

How to Redeem Shares..........................................................20

Special Redemption Features.................................................21

Contingent Deferred Sales Charge............................................22

Elimination of Contingent Deferred
Sales Charge.............................................................22

Account and Share Information.................................................23

Corporation Information.......................................................24

Management of the Corporation...............................................24

Distribution of Class A Shares..............................................26

Administration of the Fund..................................................27

Expenses of the Fund and Class A Shares.....................................27

Brokerage Transactions......................................................28
Shareholder Information.......................................................28

Voting Rights...............................................................28

Tax Information...............................................................29

Federal Income Tax..........................................................29

State and Local Taxes.......................................................29

Performance Information.......................................................30

Other Class of Shares.........................................................30

Appendix......................................................................31

Addresses.....................................................................34

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

SUMMARY OF FUND EXPENSES

FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<S> <C> <C>
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................. 5.50%
Maximum Sales Charge 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)................................................................. 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(2).............................................................. 0.44%
12b-1 Fee(3).................................................................................. 0.00%
Total Other Expenses.......................................................................... 1.41%
Shareholder Services Fee......................................................... 0.25%
Total Operating Expenses(4).......................................................... 1.85%
</TABLE>

(1) Class A Shares purchased with the proceeds of a redemption of shares of an
unaffiliated investment company purchased or redeemed with a sales charge
and not distributed by Federated Securities Corp. may be charged a
contingent deferred sales charge of 0.50% for redemptions made within one
full year of purchase. See "Contingent Deferred Sales Charge."

(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 anticipated voluntary waiver at any time at its sole
discretion. The maximum management fee is 1.10%.

(3) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1996. If Class A Shares were
paying or accruing the 12b-1 fee, Class A Shares would be able to pay up to
0.25% of its average daily net assets for the 12b-1 fee. See "Corporation
Information."

(4) The operating expenses are estimated to be 2.51% absent the anticipated
voluntary waiver of a portion of the management fee.

* Total operating expenses in the table above are estimated based on average
expenses expected to be incurred during the period ending November 30, 1996.
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 will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "What Shares Cost" and "Corporation 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............................... $ 78 $ 110
You would pay the following expenses on the same investment, assuming no redemption...... $ 73 $ 110
</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 CLASS A SHARES' FISCAL YEAR ENDING
NOVEMBER 30, 1996.

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

GENERAL INFORMATION

The Corporation was established under the laws of the state of Maryland on
January 25, 1994. The Corporation's address is 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. As of the date of this prospectus, the Board
of Directors (the "Directors") has established three classes of shares for the
Fund, known as Class A Shares, Class B Shares, and Class C Shares. This
prospectus relates only to the Class A Shares (the "Shares") of the Fund.

Shares of the Fund are designed for individuals and institutions seeking
long-term growth of capital by investing primarily in equity securities of Asian
and Pacific Rim companies.

For information on how to purchase Shares of the Fund, please refer to "How to
Purchase Shares." The minimum initial investment for Class A Shares is $500.
However, the minimum initial investment for a retirement account 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.

In general, Class A 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 under certain circumstances. For a more complete description,
see "How to Redeem Shares."

In addition, the Fund also pays a shareholder services fee at an annual rate not
to exceed 0.25% of average daily net assets.

Information regarding the exchange privilege offered with respect to the Fund
and certain other funds for which affiliates of Federated Investors serve as
investment adviser or principal underwriter (the "Federated Funds") can be found
under "Exchange Privilege."

Investors should be aware of the following general observations. The Fund may
make certain investments and employ certain investment techniques that involve
risks, including, but not limited to, investing in non-U.S. issuers, entering
into repurchase agreements, investing in when-issued securities, lending
portfolio securities, and entering into futures contracts and related options.
These risks are described under "Investment Policies."

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

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

INVESTMENT OBJECTIVE

The Fund seeks to provide long-term growth of capital. Any income received from
the portfolio is incidental. The investment objective of the Fund cannot be
changed without the approval of the shareholders. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing primarily in equity
securities of Asian and Pacific Rim companies. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity securities of
companies located in Asia and the Pacific Rim. The Fund may invest in securities
of issuers located in any country in Asia or the Pacific Rim where the
investment adviser believes there is potential for above-average capital
appreciation. Such countries may include, but are not limited to: Australia,
China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand,
Pakistan, the Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and those
countries comprising the Indian sub-continent. The Fund may invest in other
countries in Asia and the Pacific Rim when their markets become sufficiently
developed, in the opinion of the investment adviser. The Fund intends to
allocate its investments among at least three countries at all times and does
not expect to concentrate investments in any particular industry.

Asian and Pacific Rim companies are defined as (i) those organized under the
laws of, or with a principal office located in, an Asian or Pacific Rim country
or (ii) those for which the principal securities trading market is in Asia or
the Pacific Rim or (iii) those, wherever organized or traded, which derived
(directly or indirectly through subsidiaries) at least 50% of their total
assets, capitalization, gross revenue or profit in their most current fiscal
year from goods produced, services performed, or sales made in Asia or the
Pacific Rim.

Unless indicated otherwise, the investment policies of the Fund may be changed
by the Directors without the approval of the shareholders of the Fund.
Shareholders will be notified before any material change in these policies
becomes effective.

ACCEPTABLE INVESTMENTS

The equity securities in which the Fund may invest include common stock,
preferred stock (either convertible or non-convertible), sponsored or
unsponsored depositary receipts or shares, and warrants, including other
substantially similar forms of equity with comparable risk characteristics as
well as other forms which may be developed in the future. Securities may be
purchased on securities exchanges, traded over-the-counter, or have no organized
market. The Fund may also purchase corporate and government fixed income
securities denominated in currencies other than U.S. dollars; enter into forward
commitments, repurchase agreements and foreign currency transactions; maintain
reserves in foreign or U.S. money market instruments and cash; and purchase
options and financial futures contracts.

COMMON AND PREFERRED STOCK

dividends or reinvested in the company to help it grow. Increases and decreases
in earnings are usually reflected in a company's stock price, so common stocks
generally have the greatest appreciation and depreciation potential of all
corporate securities. While most preferred stocks pay a dividend, the Fund may
purchase preferred stock where the issuer has omitted, or is in danger of
omitting, payment of its dividend. Such investments would be made primarily for
their capital appreciation potential.

In selecting securities, the investment adviser typically evaluates industry
trends, a company's financial strength, its competitive position in domestic and
export markets, technology, recent developments and profitability, together with
overall growth prospects. Other considerations generally include quality and
depth of management, government regulation, and availability and cost of labor
and raw materials. Investment decisions are made without regard to arbitrary
criteria as to minimum asset size, debt-equity ratios or dividend history of
portfolio companies.

DEPOSITARY RECEIPTS

The Fund may invest in foreign issuers by purchasing sponsored or unsponsored
securities representing underlying international securities such as American
Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"), European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"), Global
Depositary Certificates ("GDCs"), and International Depositary Receipts ("IDRs")
or securities convertible into foreign equity securities. ADRs and ADSs
typically are issued by a United States bank or trust company and evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depositary Receipts ("CDRs"), GDRs,
GDCs, and IDRs are typically issued by foreign banks or trust companies,
although they also may be issued by United States banks or trust companies, and
evidence ownership of underlying securities issued by either a foreign or a
United States corporation. ADRs, ADSs, CDRs, EDRs, GDRs, GDCs, and IDRs are
collectively known as "Depositary Receipts." Depositary Receipts may be
available for investment through "sponsored" or "unsponsored" facilities. A
sponsored facility is established jointly by the issuer of the security
underlying the receipt and a depositary, whereas an unsponsored facility may be
established by a depositary without participation by the issuer of the receipt's
underlying security. Holders of an unsponsored Depositary Receipt generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through to the holders of the receipts voting rights with respect to the
deposited securities.

DEBT SECURITIES

In pursuit of the Fund's objective of long-term growth of capital, the Fund may
invest up to 35% of its total assets in debt securities. Capital appreciation in
debt securities may arise as a result of favorable changes in the
creditworthiness of issuers, relative interest rate levels, or relative foreign
exchange rates. Any income received from debt securities is incidental to the
Fund's objective of long-term growth of capital. These debt obligations consist
of U.S. and foreign government securities and corporate debt securities,
including, but not limited to, Samurai and Yankee bonds, Eurobonds and
depositary receipts. The issuers of such debt securities may or may not be
domiciled in Asia or the Pacific Rim.

investment adviser. Such debt securities are commonly known as "junk bonds." The
prices of fixed income securities generally fluctuate inversely to the direction
of interest rates. Please refer to the Appendix in this prospectus for a
description of these ratings.

CONVERTIBLE SECURITIES

The Fund may invest in convertible securities rated, at the time of purchase, as
low as C by S&P or Fitch or Moody's, or, if unrated, are of comparable quality
as determined by the investment adviser.

Convertible securities are fixed income securities which may be exchanged or
converted into a predetermined number of the issuer's underlying common stock at
the option of the holder during a specified time period. Convertible securities
may take the form of convertible bonds, convertible preferred stock or
debentures, units consisting of "usable" bonds and warrants or a combination of
the features of several of these securities. The investment characteristics of
each convertible security vary widely, which allows convertible securities to be
employed for a variety of different investment strategies. In selecting a
convertible security, the investment adviser evaluates the investment
characteristics of the convertible security as a fixed income investment, and
the investment potential of the underlying security for capital appreciation.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

Due to restrictions on direct investment by foreign entities in certain Asian or
Pacific Rim markets, investments in other investment companies may be the most
practical or only manner in which the Fund can participate in the securities
markets of certain countries in Asia and the Pacific Rim. The Fund may also
invest in other investment companies for the purpose of investing its short-term
cash on a temporary basis. The Fund may invest up to 10% of its total assets in
the securities of other investment companies. To the extent that the Fund
invests in securities issued by other investment companies, the Fund will
indirectly bear its proportionate share of any fees and expenses paid by such
companies, in addition to the fees and expenses payable directly by the Fund.

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 restrictions on resale under
federal securities law. The Fund will limit investment in restricted securities
to 10% of its total assets. Securities that can be traded without material
restrictions in non-U.S. securities markets will not be treated as restricted,
even if they cannot be traded in U.S. securities markets without restriction.
Restricted securities may be issued by new and early stage companies which may
include a high degree of business and financial risk that can result in
substantial losses. As a result of the absence of a public trading market for
these securities, they may be less liquid than publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized from these sales could be less than those originally paid by
the Fund, or less than what may be considered the fair value of such securities.
Further, companies whose securities are not publicly traded may not be subject
to the disclosure and other investor protection requirements which might be
applicable if their securities were publicly traded. If such securities are
required to be registered under the securities laws of one or more jurisdictions
before being resold, the Fund may be required to bear the expense of
registration. The Fund will limit investments in illiquid securities, including
certain restricted securities not deter-

mined by the Directors to be liquid, over-the counter options, swap agreements
not determined to be liquid, and repurchase agreements providing for settlement
in more than seven days after notice, to 15% of its net assets.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements. Repurchase agreements are
arrangements by which the Fund purchases a security for cash and obtains a
simultaneous commitment from the seller (usually a bank or broker/dealer) to
repurchase the security at an agreed-upon price and specified future date. The
repurchase price reflects an agreed-upon interest rate for the time period of
the agreement. The Fund's risk is the inability of the seller to pay the
agreed-upon price on the delivery date. However, this risk is tempered by the
ability of the Fund to sell the security in the open market in the case of a
default. In such a case, the Fund may incur costs in disposing of the security
which would increase Fund expenses. The investment adviser will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.

WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for different times in the future. The seller's
failure to complete these transactions may cause the Fund to miss a price or
yield considered to be advantageous. 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. Accordingly, the Fund may pay more
or less than the market value of the securities on the settlement date.

The Fund may dispose of a commitment prior to settlement if the investment
adviser deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current market
values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.

LENDING OF PORTFOLIO SECURITIES

There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

TEMPORARY INVESTMENTS

For temporary defensive purposes, when the investment adviser determines that
market conditions warrant (up to 100% of total assets) and to maintain liquidity
(up to 35% of total assets), the Fund may invest in U.S. and foreign debt
instruments as well as cash or cash equivalents, including foreign and domestic
money market instruments, short-term government and corporate obligations, and
repurchase agreements.

FORWARD COMMITMENTS

Forward commitments are contracts to purchase securities for a fixed price at a
date beyond customary settlement time. The Fund may enter into these contracts
if liquid securities in amounts sufficient to meet the purchase price are
segregated on the Fund's records at the trade date and maintained until the
transaction has been settled. Risk is involved if the value of the security
declines before settlement. Although the Fund enters into forward commitments
with the intention of acquiring the security, it may dispose of the commitment
prior to settlement and realize short-term profit or loss.

FOREIGN CURRENCY TRANSACTIONS

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 exchanges 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. Further,
the Fund may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations.
Cross-hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.

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 and are maintained until
the contract has been settled. The Fund will not enter into a forward contract
with a term of more than one year. 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 24 hours and 60 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 value of the Fund's assets denominated in that currency at the
time the contract was initiated, but as consistent with their other investment
policies and as not otherwise limited in their ability to use this strategy.

OPTIONS

The Fund may deal in options on foreign currencies, securities, and securities
indices, and on futures contracts involving these items, which options may be
listed for trading on an international securities exchange or traded over-the-
counter. The Fund may use options to manage interest rate and currency risks.
The Fund may also write covered call options and secured put options to seek to
generate income or lock in gains. The Fund may write covered call options and
secured put options on up to 25% of its net assets and may purchase put and call
options provided that no more than 5% of the fair market value of its net assets
may be invested in premiums on such options.

A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying currency, security or other asset at the
exercise price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying currency,
security or other asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow, and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by the Fund is exercised, the Fund foregoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is the risk that the Fund may
be required to take delivery of the underlying asset at a disadvantageous price.

Over-the-counter options ("OTC options") differ from exchange traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event the Fund
may experience material losses. However, in writing options, the premium is paid
in advance by the dealer. OTC options, which may not be continuously liquid, are
available for a greater variety of assets, and with a wider range of expiration
dates and exercise prices, than are exchange traded options.

It is not certain that a secondary market for positions in options, or futures
contracts (see below), will exist at all times. Although the investment adviser
will consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.

FUTURES AND OPTIONS ON FUTURES

Fund are generally subject to segregation and coverage requirements established
by either the Commodities Futures Trading Commission ("CFTC") or the Securities
and Exchange Commission ("SEC"), with the result that, if the Fund does not hold
the instrument underlying the futures contract or option, the Fund will be
required to segregate on an ongoing basis with its custodian cash, U.S.
government securities, or other liquid high grade debt obligations in an amount
at least equal to the Fund's obligations with respect to such instruments.

The Fund may enter into securities index futures contracts and purchase and
write put and call options on securities index futures contracts that are traded
on regulated exchanges, including non-U.S. exchanges, to the extent permitted by
the CFTC. Securities index futures contracts are based on indexes that reflect
the market value of securities of the firms included in the indexes. An index
futures contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the differences between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written.

The Fund may enter into securities index futures contracts to sell a securities
index in anticipation of or during a market decline to attempt to offset the
decrease in market value of securities in its portfolio that might otherwise
result. When the Fund is not fully invested and anticipates a significant market
advance, it may enter into futures contracts to purchase the index in order to
gain rapid market exposure that may in part or entirely offset increases in the
cost of securities that it intends to purchase. In many of these transactions,
the Fund will purchase such securities upon termination of the futures position
but, depending on market conditions, a futures position may be terminated
without the corresponding purchases of common stock. The Fund may also invest in
securities index futures contracts when the investment adviser believes such
investment is more efficient, liquid, or cost-effective than investing directly
in the securities underlying the index.

An option on a securities index futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a securities index
futures contract. The Fund may purchase and write put and call options on
securities index futures contracts in order to hedge all or a portion of its
investment and may enter into closing purchase transactions with respect to
written options in order to terminate existing positions. There is no guarantee
that such closing transactions can be effected. The Fund may also invest in
options on securities index futures contracts when the investment adviser
believes such investment is more efficient, liquid or cost-effective than
investing directly in the futures contract or in the securities underlying the
index, or when the futures contract or underlying securities are not available
for investment upon favorable terms.

The use of futures and related options involves special consideration and risks,
for example, (1) the ability of the Fund to utilize futures successfully will
depend on the investment adviser's ability to predict pertinent market
movements; (2) there might be imperfect correlation, or even no correlation,
between the change in market value of the securities held by the Fund and the
prices of the futures and options thereon relating to the securities purchased
or sold by the Fund. The use of futures and related options may reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements but they can also reduce the opportunity for gain by offsetting the
positive effect of favorable price movements in positions. No assurance can be
given that the investment adviser's judgment in this respect will be correct.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the investment adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.

New futures contracts, options thereon, and other financial products and risk
management techniques continue to be developed. The Fund may use these
investments and techniques to the extent consistent with its investment
objective and regulatory and federal tax considerations.

RISKS OF FUTURES AND
OPTIONS TRANSACTIONS

When the Fund uses futures and options on futures as hedging devices, there is a
risk that the prices of the securities subject to the futures contracts may not
correlate perfectly with the prices of the securities in the Fund's portfolio.
This may cause the futures contract and any related options to react differently
than the portfolio securities to market changes. In addition, the investment
adviser could be incorrect in its expectations about the direction or extent of
market factors such as stock price movements. In these events, the Fund may lose
money on the futures contract or option.

SWAP AGREEMENTS

As one way of managing its exposure to different types of investments, the Fund
may enter into interest rate swaps, currency swaps, and other types of swap
agreements such as caps, collars, and floors. Depending on how they are used,
swap agreements may increase or decrease the overall volatility of the Fund's
investments, its share price and yield.

Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on the
Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. The Fund may also suffer losses if
it is unable to terminate outstanding swap agreements to reduce its exposure
through offsetting transactions. When the Fund enters into a swap agreement,
assets of the Fund equal to the value of the swap agreement will be segregated
by the Fund.

DERIVATIVE CONTRACTS
AND SECURITIES

contracts and securities to market changes may differ from traditional
investments, such as stock and bonds, derivatives do not necessarily present
greater market risks than traditional investments. The Fund will only use
derivative contracts for the purposes disclosed in the applicable prospectus
sections above. To the extent that the Fund invests in securities that could be
characterized as derivatives, it will only do so in a manner consistent with its
investment objective, policies and limitations.

RISK CHARACTERISTICS OF
FOREIGN SECURITIES

Investing in non-U.S. securities carries substantial risks in addition to those
associated with domestic investments. In an attempt to reduce some of these
risks, the Fund intends to diversify its investments broadly among foreign
countries which may include both developed and developing countries.

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

Prior governmental approval for foreign investments may be required under
certain circumstances in some countries, and the extent of foreign investment in
certain debt securities and domestic companies may be subject to limitation.
Foreign ownership limitations also may be imposed by the charters of individual
companies to prevent, among other concerns, violation of foreign investment
limitations.

Repatriation of investment income, capital, and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some
countries. The Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental registration or approval for such repatriation.
Any investment subject to such repatriation controls will be considered illiquid
if it appears reasonably likely that this process will take more than seven
days.

With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies of such countries or
the value of the Fund's investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the United
States.

could cause the Fund to miss attractive investment opportunities. Inability to
dispose of a portfolio security due to settlement problems could result either
in losses to the Fund due to subsequent declines in value of the portfolio
security or, if the Fund has entered into a contract to sell the security, could
result in possible liability to the purchaser.

CURRENCY RISKS

Because the majority of the securities purchased by the Fund are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value; the value of interest earned;
gains and losses realized on the sale of securities; and net investment income
and capital gain, if any, to be distributed to shareholders by the Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of Fund
assets denominated in the currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease. Under the United States Internal
Revenue Code, as amended (the "Code"), the Fund is required to separately
account for the foreign currency component of gains or losses, which will
usually be viewed under the Code as items of ordinary and distributable income
or loss, thus affecting the Fund's distributable income. (See "Federal Income
Tax".)

The exchange rates between the U.S. dollar and foreign currencies are a function
of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental intervention, speculation and
other economic and political conditions. Although the Fund values its assets
daily in U.S. dollars, the Fund will not convert its holdings 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 may realize a
profit on the difference between the price 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 issuers;

- - credit risks associated with certain foreign governments;

- - the lack of uniform accounting, auditing, and financial reporting standards
and practices or regulatory requirements comparable to those applicable to
U.S. companies;

- - less readily available market quotations on foreign issues;

- - differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;

- - differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;
- - the limited size of many foreign securities markets and limited trading volume
in issuers compared to the volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the quality of
securities;

- - the likelihood that securities of foreign issuers 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;

- - increased risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities;

- - certain markets may require payment for securities before delivery;

- - religious and ethnic instability; and

- - certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests.

U.S. GOVERNMENT POLICIES

In the past, U.S. government policies have discouraged or restricted certain
investments abroad by investors such as the Fund. Investors are advised that
when such policies are instituted, the Fund will abide by them.
INVESTING IN ASIA AND
THE PACIFIC RIM

The Fund is susceptible to political and economic factors affecting issuers in
Asian and Pacific Rim countries. Many of the countries of Asia and the Pacific
Rim are developing both economically and politically. Asian and Pacific Rim
countries may have relatively unstable governments, economies based on only a
few commodities or industries, and securities markets trading infrequently or in
low volumes. Some Asian and Pacific Rim countries restrict the extent to which
foreigners may invest in their securities markets. Securities of issuers located
in some Asian and Pacific Rim countries tend to have volatile prices and may
offer significant potential for loss as well as gain. Further, certain companies
in Asia and the Pacific Rim may not have firmly established product markets, may
lack depth of management, or may be more vulnerable to political or economic
developments such as nationalization of their own industries.

RISK FACTORS RELATING
TO INVESTING IN
HIGH YIELD SECURITIES

The debt securities in which the Fund invests are usually not in the three
highest rating categories of a nationally recognized statistical rating
organization (AAA, AA, or A for S&P or Fitch and Aaa, Aa, or A for Moody's), but
are in the lower rating categories or are unrated, but are of comparable quality
and have speculative characteristics or are speculative. Lower-rated bonds or
unrated bonds are commonly referred to as "junk bonds." A description of the
rating categories is contained in the Appendix of this prospectus.

The Fund's 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.

INVESTMENT LIMITATIONS

The Fund will not:

- - borrow money directly or through reverse repurchase agreements (arrangements
in which the Fund sells a portfolio instrument for a percentage of its cash
value with an agreement to buy it back on a set date) or pledge securities
except, under certain circumstances, the Fund

may borrow up to one-third of the value of its total assets and pledge its
assets to secure such borrowings; or

- - with respect to 75% of its total assets, invest more than 5% of the value of
its total assets in securities of any one issuer (other than cash, cash items,
or securities issued or guaranteed by the U.S. government and its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) or acquire more than 10% of the outstanding voting securities of
any one issuer.

The above investment limitations cannot be changed without shareholder
approval.
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NET ASSET VALUE

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on 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.

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

HOW TO PURCHASE SHARES

Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500. Additional investments can be made
for as little as $100. The minimum initial and subsequent investment for
retirement plans is only $50. (Financial institutions may impose different
minimum investment requirements on their customers.)

In connection with any sale, 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. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.

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 DEALER
SALES CHARGE AS A PERCENTAGE CONCESSION
A PERCENTAGE OF NET AS A PERCENTAGE
AMOUNT OF OF OFFERING AMOUNT OF PUBLIC
TRANSACTION PRICE INVESTED OFFERING PRICE
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than
$50,000...... 5.50% 5.82% 5.00%
$50,000 but
less than
$100,000..... 4.50% 4.71% 4.00%
$100,000 but
less than
$250,000..... 3.75% 3.90% 3.25%
$250,000 but
less than
$500,000..... 2.50% 2.56% 2.25%
$500,000 but
less than
$1 million... 2.00% 2.04% 1.80%
$1 million or
greater...... 0.00% 0.00% 0.25%*
</TABLE>

* See sub-section entitled "Dealer Concession."

No sales charge is imposed for Shares purchased through financial intermediaries
that do not receive a reallowance of a sales charge. However, investors who
purchase Shares through a trust department, investment adviser, or other
financial intermediary may be charged a service or other fee by the financial
intermediary. Additionally, no sales charge is imposed on shareholders
designated as Liberty Life Members or on Shares purchased through "wrap
accounts" or similar programs, under which clients pay a fee for services.

DEALER CONCESSION

payments may take the form of cash or promotional incentives, such as
reimbursement of certain expenses of qualified employees and their spouses to
attend informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales charge; however, the distributor will make
twelve monthly payments to the dealer totaling 0.25% of the public offering
price over the first year following the purchase. Such payments are based on the
original purchase price of Shares outstanding at each month end.

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 or eliminated on the purchase of Shares through:

- - quantity discounts and accumulated purchases;

- - concurrent purchases;

- - signing a 13-month letter of intent;

- - using the reinvestment privilege; or

- - purchases with proceeds from redemptions of unaffiliated investment company
shares.
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.

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 $30,000 and he
purchases $20,000 more at the current public offering price, the sales charge on
the additional purchase according to the schedule now in effect would be 4.50%,
not 5.50%.

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.

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge reduction, a shareholder has the
privilege of combining concurrent purchases of two or more Federated Funds, the
purchase price of which includes a sales charge. For example, if a shareholder
concurrently invested $30,000 in Class A Shares of one of the other Federated
Funds with a sales charge, and $20,000 in Class A Shares of 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.

LETTER OF INTENT

If a shareholder intends to purchase at least $50,000 of shares of Federated
Funds (excluding money market 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 up to 5.50% of the total amount intended to be purchased in
escrow (in Shares) until such purchase is completed.

The Shares held in escrow in the shareholder's account will be released upon
fulfillment of the letter of intent or the end of the 13-month period, whichever
comes first. If the amount specified in the letter of intent is not purchased,
an appropriate number of escrowed Shares may be redeemed in order to realize the
difference in the sales charge.

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Shares of any Federated Fund,
excluding money market accounts, will be aggregated to provide a purchase credit
towards 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 the privilege,
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
INVESTMENT COMPANIES

Investors may purchase Shares at net asset value, without a sales charge, with
the proceeds from the redemption of shares of an unaffiliated investment company
that were purchased or sold with a sales charge or commission and were not
distributed by Federated Securities Corp. 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. From time to time, the Fund may offer dealers a payment of .50 of 1.00%
for Shares purchased under this program. If Shares are purchased in this manner,
Fund purchases will be subject to a contingent deferred sales charge for one
year from the date of purchase. Shareholders will be notified prior to the
implementation of any special offering as described above.

PURCHASING SHARES 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 placed through a financial
institution are considered received when the Fund is notified of the purchase
order or when payment is converted into federal funds. 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. It is the
financial institution's responsibility to transmit orders promptly. Financial
institutions may charge additional fees for their services.

PURCHASING SHARES BY WIRE

Once an account has been established, Shares may be purchased by wire by calling
the Fund. All information needed will be taken over the telephone, and the order
is considered received immediately. Payment for purchases which are subject to a
sales charge must be received within three business days following the order.
Payment for purchases on which no sales charge is imposed must be received
before 3:00 p.m. (Eastern time) on the next business day following the order.
Federal funds should be wired as follows: State Street Bank and Trust Company,
Boston, Massachusetts; Attn: EDGEWIRE; For Credit to: (Fund Name) (Fund Class);
(Fund Number); Account Number; Trade Date and Order Number; Group Number or
Dealer Number; Nominee or Institution Name; and ABA Number 011000028. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK

Once an account has been established, Shares may be purchased by sending a check
made payable to the name of the Fund (designate class of Shares and account
number) to: Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600. Orders by mail are considered received when payment by
check is converted into federal funds (normally the business day after the check
is received).

SPECIAL PURCHASE FEATURES

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 at
an Automated Clearing House ("ACH") member and invested in the Fund at the net
asset value next determined after an order is received by the Fund, plus the
sales charge, if applicable. Shareholders should contact their financial
institution or the Fund to participate in this program.

RETIREMENT PLANS

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

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EXCHANGE PRIVILEGE

Class A shareholders may exchange all or some of their Shares for Class A Shares
of other Federated Funds as listed herein at net asset value. Neither the Fund
nor any of the Federated Funds imposes any additional fees on exchanges.
Shareholders in certain other Federated Funds may exchange all or some of their
shares for Class A Shares.

The Fund has exchange privileges with the following Federated Funds:

American Leaders Fund, Inc.; Capital Growth Fund (Class A Shares and Class C
Shares only); Federated Bond Fund; Federated Emerging Markets Fund; Federated
European Growth Fund; Federated International Equity Fund; Federated
International Income Fund; Federated International Small Company Fund; Federated
Latin American Growth Fund; Federated Limited Term Fund (Class A Shares only);
Federated Limited Term Municipal Fund (Class A Shares only); Federated Small Cap
Strategies Fund; Federated Strategic Income Fund; Federated World Utility Fund;
Fund for U.S. Government Securities, Inc.; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Utility Fund, Inc.; Michigan
Intermediate Municipal Trust (Class A Shares only); Pennsylvania Municipal
Income Fund (Class A Shares only); and Tax-Free Instruments Trust (Class A
Shares only).

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

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

REQUIREMENTS FOR EXCHANGE

Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of 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
shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
proceeds invested in the same class of 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.

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

Instructions for exchanges for the Federated Funds may be given in writing or by
telephone. 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 Shareholder Services Company, 500 Victory
Road -- 2nd Floor, North Quincy, Massachusetts 02171.

TELEPHONE INSTRUCTIONS

Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with the Fund.
If the instructions are given by a broker, a telephone authorization form
completed by the broker must be on file with the Fund. If reasonable procedures
are not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent 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 Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600 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 the Fund before that time for Shares to be
exchanged the same day. Shareholders exchanging into a fund will begin receiving
dividends the following business day. This privilege may be modified or
terminated at any time.

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

HOW TO REDEEM SHARES

Shares are redeemed at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund 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
as described below.

REDEEMING SHARES THROUGH
A FINANCIAL INSTITUTION
Shares of the Fund may be redeemed by calling your financial institution to
request the redemption. Shares will be redeemed at the net asset value, less any
applicable contingent deferred sales charge next determined after the Fund
receives the redemption request from 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
(such as banks) 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. Customary fees and commissions may be charged by the financial
institution for this service.

REDEEMING SHARES BY TELEPHONE

shareholder's address of record or by wire transfer to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System.
The minimum amount for a wire transfer is $1,000. Proceeds from redeemed Shares
purchased by check or through ACH will not be wired until that method of payment
has cleared. Proceeds from redemption requests received on holidays when wire
transfers are restricted will be wired the following business day. Questions
about telephone redemptions on days when wire transfers are restricted should be
directed to your shareholder services representative at the telephone number
listed on your account statement.

Telephone instructions will 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
this occurs, "Redeeming Shares By Mail" should be considered. If at any time the
Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.

REDEEMING SHARES BY MAIL

Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail to the address noted above.

The written request should state: the Fund name and Class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the receipt of a proper written redemption request. Dividends
are paid up to and including the day that a redemption request is processed.

Shareholders requesting 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 their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; 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.

SPECIAL REDEMPTION FEATURES

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 the Fund. For
this reason, payments under this program should not be considered as yield or
income on the shareholder's investment in the Fund. 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 continue to
purchase Shares while participating in this program.

CONTINGENT DEFERRED SALES CHARGE

Class A Shares purchased under a periodic special offering with the proceeds of
a redemption of shares of an unaffiliated investment company purchased or
redeemed with a sales charge and not distributed by Federated Securities Corp.
may be charged a contingent deferred sales charge of .50 of 1.00% for
redemptions made within one full year of purchase. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.

The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than one
full year from the date of purchase. Redemptions will be processed in a manner
intended to maximize the amount of redemption which will not be subject to a
contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than one full year from the
date of purchase; (3) Shares held for less than one full year from the date of
purchase on a first-in, first-out basis. A contingent deferred sales charge is
not assessed in connection with an exchange of Fund Shares for shares of other
funds in the Federated Funds in the same class (see "Exchange Privilege"). Any
contingent deferred sales charge imposed at the time the exchanged-for Shares
are redeemed is calculated as if the shareholder had held the shares from the
date on which he became a shareholder of the exchanged-from Shares. Moreover,
the contingent deferred sales charge will be eliminated with respect to certain
redemptions (see "Elimination of Contingent Deferred Sales Charge").

ELIMINATION OF CONTINGENT
DEFERRED SALES CHARGE

The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended, of
a shareholder; (2) redemptions representing minimum required distributions from
an Individual Retirement Account or other retirement plan to a shareholder who
has attained the age of 70 1/2; and (3) involuntary redemptions by the Fund of
Shares in shareholder accounts that do not comply with the minimum balance
requirements. No contingent deferred sales charge will be imposed on redemptions
of Shares held by Directors, employees and sales representatives of the Fund,
the distributor, or affiliates of the Fund or distributor; employees of any
financial institution that sells Shares of the Fund pursuant to a sales
agreement with the distributor; and spouses and children under the age of 21 of
the aforementioned persons. Finally, no contingent deferred sales charge will be
imposed on the redemption of Shares originally purchased through a bank trust
department, an investment adviser registered under the Investment Advisers Act
of 1940, as amended, or retirement plans where the third party administrator has
entered into certain arrangements with Federated Securities Corp. or its
affiliates, or any other financial institution, to the extent that no payments
were advanced for purchases made through such entities. The Directors reserve
the right to discontinue elimination of the contingent deferred sales charge.
Shareholders will be noti-

fied of such elimination. Any Shares purchased prior to the termination of such
waiver would have the contingent deferred sales charge eliminated as provided in
the Fund's prospectus at the time of the purchase of the Shares. If a
shareholder making a redemption qualifies for an elimination of the contingent
deferred sales charge, the shareholder must notify Federated Securities Corp. or
the transfer agent in writing that he is entitled to such elimination.

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ACCOUNT AND SHARE INFORMATION

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Shareholder Services Company maintains
a Share account for each shareholder. Share certificates are not issued unless
requested in writing to Federated Shareholder Services Company.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.

DIVIDENDS

Dividends are declared and paid annually to all shareholders invested in the
Fund on the record date. Dividends and distributions are automatically
reinvested in additional Shares of the Fund on payment dates at the ex-dividend
date net asset value without a sales charge, unless shareholders request cash
payments on the new account form or by contacting 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 year's dividend.

CAPITAL GAINS

Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.

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
$500. This requirement does not apply, however, if the balance falls below the
required minimum value because of changes in the net asset value of Shares.
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.

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CORPORATION 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.

INVESTMENT ADVISER
Investment decisions for the Fund are made by the Fund's investment adviser,
Federated Global Research Corp. (the "Adviser"), subject to direction by the
Directors. The Adviser continually conducts investment research and supervision
for the Fund and is responsible for the purchase or sale of portfolio
instruments, for which it receives an annual fee from the Fund. The Adviser's
address is 175 Water Street, New York, New York 10038-4965.

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to 1.10% of the
Fund's average daily net assets. 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. Under the investment
advisory contract, which provides for the voluntary waiver of the advisory fee
by the Adviser, the Adviser may voluntarily waive some or all of its fee. This
does not include reimbursement to the Fund of any expenses incurred by
shareholders who use the transfer agent's subaccounting facilities. The Adviser
can

terminate this voluntary waiver at any time in 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 Global Research Corp., incorporated in Delaware on May 12, 1995, is a
registered investment adviser under the Investment Advisers Act of 1940, as
amended. 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. Prior to September 1995, the Adviser had not
served as an investment adviser to mutual funds.

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $80 billion invested across more than
250 funds under management and/or administration by its subsidiaries, as of
December 31, 1995, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,800 employees,
Federated continues to be led by the management who founded the company in 1955.
Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients.

Henry A. Frantzen has been the Fund's portfolio manager since its inception. Mr.
Frantzen joined Federated Investors in 1995 as an Executive Vice President of
the Fund's investment adviser. Mr. Frantzen served as Chief Investment Officer
of international equities at Brown Brothers Harriman & Co. from 1992 until 1995.
He was the Executive Vice President and Director of Equities at Oppenheimer
Management Corporation from 1989 to 1991.

Drew J. Collins has been the Fund's portfolio manager since its inception. Mr.
Collins joined Federated Investors in 1995 as a Senior Vice President of the
Fund's investment adviser. Mr. Collins served as Vice President/Portfolio
Manager of international equity portfolios at Arnold and S. Bleichroeder, Inc.
from 1994 to 1995. He served as an Assistant Vice President/Portfolio Manager
for international equities at the College Retirement Equities Fund from 1986 to
1994. Mr. Collins is a Chartered Financial Analyst and received his M.B.A. in
Finance from the University of Pennsylvania.

Alexandre de Bethmann has been the Fund's portfolio manager since its inception.
Mr. de Bethmann joined Federated Investors in 1995 as a Vice President of the
Fund's investment adviser. Mr. de Bethmann served as Assistant Vice
President/Portfolio Manager for Japanese and Korean equities at the College
Retirement Equities Fund from 1994 to 1995. He served as an International
Equities Analyst and then as an Assistant Portfolio Manager at the College
Retirement Equities Fund between 1987 and 1994. Mr. de Bethmann received his
M.B.A. in Finance from Duke University.

Mark S. Kopinski has been the Fund's portfolio manager since its inception. Mr.
Kopinski joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. Mr. Kopinski served as Vice President/Portfolio Manager of
international equity funds at Twentieth Century Mutual Funds from 1990 to 1995.
Mr. Kopinski received his M.A. in Asian Studies from the University of Illinois.

Both the Corporation and the Adviser have adopted strict codes of ethics
governing the con-

duct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Board of Directors,
and could result in severe penalties.

DISTRIBUTION OF CLASS A SHARES

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

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), the distributor may be paid a fee in an amount
computed at an annual rate of up to 0.25 of 1% of the average daily net assets
of Shares to finance any activity which is principally intended to result in the
sale of Shares subject to the Distribution Plan. The Fund does not currently
make payments to the distributor or charge a fee under the Distribution Plan for
Shares, and shareholders will be notified if the Fund intends to charge a fee
under the Distribution Plan. For Shares, the distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales services or distribution-related
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 amounts or may earn a profit from future payments made by Shares
under the Plan.

for the performance of sales services, distribution-related support services, or
shareholder services.

OTHER PAYMENTS TO
FINANCIAL INSTITUTIONS

Federated Securities Corp. will pay financial institutions, at the time of
purchase, an amount equal to 0.50 of 1% of the net asset value of Shares
purchased by their clients or customers under certain qualified retirement plans
as approved by Federated Securities Corp. (Such payments are subject to a
reclaim from the financial institution should the assets leave the program
within 12 months after purchase.)

Furthermore, Federated Securities Corp. and Federated Shareholder Services may
offer to pay a fee from their own assets to financial institutions as financial
assistance for providing substantial marketing and sales support. The support
may include sponsoring sales, educational and training seminars for their
employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's Adviser or its affiliates.

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 Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- ------------------- --------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.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.

EXPENSES OF THE FUND AND
CLASS A SHARES

Holders of Shares pay their allocable portion of Corporation and portfolio
expenses.

The Corporation expenses for which holders of Class A 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 portfolio expenses for which holders of Class A Shares pay their allocable
portion include, but are not limited to: registering the portfolio and Class A
Shares of the portfolio; 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.

expenses to holders of Class A Shares as they deem 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 Class A Shares; 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 to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Class A
Shares; legal fees relating solely to Class A Shares; and Directors' fees
incurred as a result of issues related solely to Class A Shares.

BROKERAGE TRANSACTIONS

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

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SHAREHOLDER INFORMATION

VOTING RIGHTS

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

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 Corporation's or the Fund's operation and for the election of
Directors under certain circumstances.

Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Corporation's
outstanding shares of all series entitled to vote.

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TAX INFORMATION

FEDERAL INCOME TAX

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 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. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.

Due to differences in the book and tax treatment of fixed income securities
denominated in foreign currencies, it is difficult to project currency effects
on an interim basis. Therefore, to the extent that currency fluctuations cannot
be anticipated, a portion of distributions to shareholders could later be
designated as a return of capital, rather than income, for income tax purposes,
which may be of particular concern to simple trusts.

If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. 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.

STATE AND LOCAL TAXES

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.

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PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for Class A
Shares.

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

The yield of Class A Shares is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by Class
A Shares over a thirty-day period by the maximum offering price per share of
each class on the last day of the period. This number is then annualized using
semi-annual compounding. The yield does not necessarily reflect income actually
earned by Class A Shares and, therefore, may not correlate to the dividends or
other distributions paid to shareholders.

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

Total return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares.

From time to time, advertisements for Class A Shares of the Fund may refer to
ratings, rankings, and other information in certain financial publications
and/or compare the performance of Class A Shares to certain indices.

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OTHER CLASSES OF SHARES

As of the date of this prospectus, the Fund also offers two other classes of
shares called Class B Shares and Class C Shares. This prospectus relates only to
Class A Shares.

Class B Shares are sold primarily to customers of financial institutions,
subject to a maximum contingent deferred sales charge of 5.50%. The Fund has
also adopted a Distribution Plan whereby the distributor is paid a fee of up to
0.75 of 1% and a Shareholder Services fee of up to 0.25 of 1% of the Class B
Shares' average daily net assets with respect to Class B Shares. Investments in
Class B 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.

Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales charge. Class C Shares are distributed
pursuant to a Distribution Plan adopted by the Fund whereby the distributor is
paid a fee of up to 0.75 of 1%, in addition to a Shareholder Services fee of up
to 0.25 of 1% of the Class C Shares' average daily net assets. In addition,
Class C Shares may be subject to certain contingent deferred sales charges.
Investments in Class C 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.

Class A Shares, Class B Shares, and Class C Shares are subject to certain of the
same expenses. Expense differences, however, among Class A Shares, Class B
Shares, and Class C Shares may affect the performance of each class.

To obtain more information and a prospectus for either Class B Shares or Class C
Shares, investors may call 1-800-235-4669 or contact their financial
institution.

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APPENDIX
STANDARD AND POOR'S RATINGS GROUP LONG TERM DEBT RATING DEFINITIONS

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

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

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

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

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

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

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

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

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

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

AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally

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

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

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

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

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

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

FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATING DEFINITIONS

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

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

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

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

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

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

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

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

- -- Leading market positions in well established industries.

- -- High rates of return on funds employed.

- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

- -- Broad margins in earning coverage of fixed financial charges and high
internal cash generation.

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

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

STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS

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

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

FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS

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

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

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

ADDRESSES

FEDERATED ASIA PACIFIC GROWTH FUND

CLASS A SHARES

Federated Investors Tower

Pittsburgh, Pennsylvania 15222-3779

DISTRIBUTOR

Federated Securities Corp.

Federated Investors Tower

Pittsburgh, Pennsylvania 15222-3779

INVESTMENT ADVISER

Federated Global Research Corp.

175 Water Street

New York, New York 10038-4965

CUSTODIAN

State Street Bank and Trust Company

P.O. Box 8600

Boston, Massachusetts 02266-8600

TRANSFER AGENT AND DIVIDEND

DISBURSING AGENT

Federated Shareholder Services Company

P.O. Box 8600

Boston, Massachusetts 02266-8600

INDEPENDENT AUDITORS

Ernst & Young LLP

One Oxford Centre

Pittsburgh, Pennsylvania 15219

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

FEDERATED ASIA PACIFIC
GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT
SERIES, INC.)
CLASS A SHARES
PROSPECTUS

An Open-End, Diversified
Management Investment Company

January 31, 1996

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

Distributor

A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779

CUSIP 981487 50 7

G01470-01 (2/96)

FEDERATED ASIA PACIFIC GROWTH FUND

(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)

CLASS A SHARES, CLASS B SHARES, CLASS C SHARES

SEMI-ANNUAL REPORT AND SUPPLEMENT TO THE PROSPECTUS DATED JANUARY 31, 1996

A. Please delete the third and fourth sentence of the fourth paragraph on
the cover page of the prospectus and replace it with the following:

B. Please insert the following "Financial Highlights" tables for Class A
Shares, Class B Shares and Class C Shares immediately following the "Summary
of Fund Expenses" tables in the prospectus:

FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to May 31, 1996.

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

(See Notes which are an integral part of the Financial Statements)

FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
(UNAUDITED)
MAY 31, 1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net realized and unrealized gain (loss) on investments and foreign currency 0.57
NET ASSET VALUE, END OF PERIOD $10.57
TOTAL RETURN(B) 5.70%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60%*
Net investment income (1.08%)*
Expense waiver/reimbursement(c) 8.64%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $957
Average commission rate paid $0.0095
Portfolio turnover 37%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to May 31, 1996.

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

(See Notes which are an integral part of the Financial Statements)

FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>

PERIOD ENDED
(UNAUDITED)
MAY 31, 1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net realized and unrealized gain (loss) on investments and foreign currency 0.57
NET ASSET VALUE, END OF PERIOD $10.57
TOTAL RETURN(B) 5.70%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60%*
Net investment income (1.07%)*
Expense waiver/reimbursement(c) 8.64%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $328
Average commission rate paid $0.0095
Portfolio turnover 37%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to May 31, 1996.

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

(See Notes which are an integral part of the Financial Statements)

C. Please delete the final sentence of the section entitled "Making an
Exchange" on page 23 of the prospectus and replace it with the following:

D. Please add the following as the fourth sentence of the section entitled
"How to Redeem Shares" on page 24 of the prospectus:

"Investors who redeem shares through a financial institution may be charged
a service fee by that institution."

E. Under the section entitled "Administrative Services" on page 32 of the
prospectus, please delete all references to "Federated Administrative
Services" and replace them with "Federated Services Company."
F. Please add the following as the last sentence of the first paragraph of
the section entitled "Voting Rights" on page 34 of the prospectus:

G. Please insert the following financial statements beginning on page 36 of
the prospectus, immediately before the section entitled "Appendix."

FEDERATED ASIA PACIFIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>

FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>

(a) Non-income producing security.

(b) Denotes a restricted security which is subject to restrictions on resale
under securities laws. At May 31, 1996, these securities amounted to
$237,305 which represents 4.0% of net assets.

Note: The categories of investments are shown as a percentage of net assets
($5,908,566) at May 31, 1996.

The following acronyms are used throughout this portfolio:

ADR -- American Depository Receipts

GDR -- Global Depository Receipts

LTD -- Limited

PLC -- Public Limited Company

* See "How to Purchase Shares" in the Prospectus.

** See "Contingent Deferred Sales Charge" in the
Prospectus.
(See Notes which are an integral part of the Financial Statements)

FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1996 (UNAUDITED)(A)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $2,909) $ 23,407
Interest (net of foreign taxes withheld of $1,924) 2,588
Total income 25,995
EXPENSES:
Investment advisory fee $ 13,456
Administrative personnel and services fee 48,524
Custodian fees 34,795
Transfer and dividend disbursing agent fees and expenses 6,907
Legal fees 2,911
Portfolio accounting fees 20,631
Distribution services fee -- Class B Shares 718
Distribution services fee -- Class C Shares 232
Shareholder services fee -- Class A Shares 3,047
Shareholder services fee -- Class B Shares 239
Shareholder services fee -- Class C Shares 77
Share registration costs 2,154
Printing and postage 5,019
Insurance premiums 1,723
Miscellaneous 1,723
Total expenses 142,156
Waivers and reimbursements --
Waiver of investment advisory fee $ (13,456)
Reimbursement of other operating expenses (102,798)
Total waivers and reimbursements (116,254)
Net expenses 25,902
Net investment income 93
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on investments and foreign currency transactions (1,628)
Net change in unrealized appreciation of investments and translation of assets and
liabilities in
foreign currency 300,463
Net realized and unrealized gain on investments and
foreign currency 298,835
Change in net assets resulting from operations $298,928
</TABLE>

(a) For the period from February 28, 1996 (date of initial
public investment) to May 31, 1996.
(See Notes which are an integral part of the Financial Statements)

FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
(UNAUDITED)
MAY 31, 1996(A)
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 93
Net realized gain (loss) on investments and foreign currency
transactions ($1,628 net loss, as computed for federal tax
purposes) (1,628)
Net change in unrealized appreciation (depreciation) of
investments and translation of assets and liabilities
in foreign currency 300,463
Change in net assets resulting from operations 298,928
SHARE TRANSACTIONS--
Proceeds from sale of shares 11,167,518
Cost of shares redeemed (5,557,880)
Change in net assets resulting from share transactions 5,609,638
Change in net assets 5,908,566
NET ASSETS:
Beginning of period --
End of period (including undistributed net investment income of
$93) $ 5,908,566
</TABLE>

(a) For the period from February 28, 1996 (date of initial
public investment) to May 31, 1996.
(See Notes which are an integral part of the Financial Statements)

FEDERATED ASIA PACIFIC GROWTH FUND
NOTES TO FINANCIAL STATEMENTS

MAY 31, 1996 (UNAUDITED)

1. ORGANIZATION

The Fund offers three classes of shares: Class A Shares, Class B Shares and
Class C Shares.

2. SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS -- Foreign equity securities are valued at the last
sale price reported on a national securities exchange or the
over-the-counter market. In the absence of recorded sales for equity
securities they are recorded at the last reported bid price. Short-term
domestic and foreign securities are valued at the prices provided by an
independent pricing service. However, short-term domestic and foreign
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value.

FEDERATED ASIA PACIFIC GROWTH FUND

Additional information on each restricted security held at May 31, 1996 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION ACQUISITION
DATE COST
<S> <C> <C>
Mahindra and Mahindra, GDR 2/26/96 $12,250
Bombay Suburban Electric
Supply, GDR 2/29/96 20,640
Want Want Holdings 5/16/96 55,860
Shanghai Industrial Holdings
Ltd. 5/23/96 47,537
Larsen & Toubro Ltd., GDR 3/1/96 15,350
Hindalco Industries Ltd.,
GDR 2/26/96 11,025
Steel Authority of India,
GDR 3/6/96 12,975
</TABLE>

OTHER -- Investment transactions are accounted for on the trade date.

FEDERATED ASIA PACIFIC GROWTH FUND

3. CAPITAL STOCK

At May 31, 1996, par value shares ($ 0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
# OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 150,000,000
Class B Shares 150,000,000
Class C Shares 150,000,000
Total 450,000,000
</TABLE>

Transactions in capital stock were as follows:
<TABLE>
<CAPTION>

(a) For the period from February 28, 1996 (date of initial public
investment) to May 31, 1996.

(b) For the period from February 28, 1996 (date of initial public offering)
to May 31, 1996.

FEDERATED ASIA PACIFIC GROWTH FUND

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

% OF AVG. DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>

Class A shares did not incur a Distribution services fee for the period
ended May 31, 1996, and has no present intention of paying or accruing a
Distribution services fee.

FEDERATED ASIA PACIFIC GROWTH FUND

GENERAL -- Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $6,226,838
SALES $1,428,037
</TABLE>

[This Page Intentionally Left Blank]

FEDERATED
ASIA PACIFIC
GROWTH
FUND

COMBINED
SEMI-ANNUAL REPORT AND
SUPPLEMENT TO PROSPECTUS
DATED JANUARY 31, 1996

[Graphic]
Federated Investors
Since 1955
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.

Cusip 981487507
Cusip 981487606
Cusip 981487705
G01739-01 (7/96)

[Graphic]

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

FEDERATED ASIA PACIFIC GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
PROSPECTUS

The shares of Federated Asia Pacific Growth Fund (the "Fund") represent
interests in a diversified portfolio of World Investment Series, Inc. (the
"Corporation"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to provide long-term growth of capital. Any
income received from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in equity securities of Asian and
Pacific Rim companies.

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 INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

The Fund has also filed a Statement of Additional Information dated January 31,
1996, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact your financial
institution.

Prospectus dated January 31, 1996

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

TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1

Synopsis.......................................................................4

Investment Information.........................................................5

Investment Objective.........................................................5

Investment Policies..........................................................5

Investment Limitations......................................................15

Net Asset Value...............................................................16

Investing in the Fund.........................................................17

How to Purchase Shares........................................................18

Investing in Class A Shares.................................................18

Investing in Class B Shares.................................................20

Investing in Class C Shares.................................................21

Special Purchase Features...................................................22

Exchange Privilege............................................................22

How to Redeem Shares..........................................................24

Special Redemption Features.................................................25

Contingent Deferred Sales Charge............................................26

Elimination of Contingent Deferred
Sales Charge.............................................................27

Account and Share Information.................................................28
Corporation Information.......................................................29

Management of the Corporation...............................................29

Distribution of Shares......................................................30

Administration of the Fund..................................................32

Expenses of the Fund and
Class A Shares, Class B Shares,
and Class C Shares.......................................................32

Brokerage Transactions......................................................33

Shareholder Information.......................................................34

Voting Rights...............................................................34

Tax Information...............................................................34

Federal Income Tax..........................................................34

State and Local Taxes.......................................................35

Performance Information.......................................................35

Appendix......................................................................36

Addresses.....................................................................39

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

SUMMARY OF FUND EXPENSES

FEDERATED ASIA PACIFIC GROWTH FUND
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)...................... 5.50%
Maximum Sales Charge 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)........................................................ 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)................................. None
Exchange Fee....................................................................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(2)................................................................... 0.44%
12b-1 Fee(3)....................................................................................... 0.00%
Total Other Expenses............................................................................... 1.41%
Shareholder Services Fee.............................................................. 0.25%
Total Operating Expenses(4)............................................................... 1.85%
</TABLE>

(4) The operating expenses are estimated to be 2.51% absent the anticipated
voluntary waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class A Shares" and "Corporation
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............................ $78 $110
You would pay the following expenses on the same investment, assuming
no redemption....................................................................... $73 $110
</TABLE>

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

SUMMARY OF FUND EXPENSES

FEDERATED ASIA PACIFIC GROWTH FUND
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)..................... None
Maximum Sales Charge 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).......................................................... 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)................................ None
Exchange Fee...................................................................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(2).................................................................. 0.44%
12b-1 Fee......................................................................................... 0.75%
Total Other Expenses.............................................................................. 1.41%
Shareholder Services Fee............................................................ 0.25%
Total Operating Expenses(3)(4)........................................................... 2.60%
</TABLE>

(1) The contingent deferred sales charge is 5.50% in the first year declining to
1.00% in the sixth year and 0.00% thereafter. See "Contingent Deferred Sales
Charge."

(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

(4) The operating expenses are estimated to be 3.26% absent the anticipated
voluntary waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class B Shares" and "Corporation
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 charges 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............................ $83 $124
You would pay the following expenses on the same investment, assuming
no redemption....................................................................... $26 $ 81
</TABLE>

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

SUMMARY OF FUND EXPENSES

FEDERATED ASIA PACIFIC GROWTH FUND
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)..................... None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(2).................................................................. 0.44%
12b-1 Fee......................................................................................... 0.75%
Total Other Expenses.............................................................................. 1.41%
Shareholder Services Fee............................................................ 0.25%
Total Operating Expenses(3).............................................................. 2.60%
</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 one
year of their purchase date. See "Contingent Deferred Sales Charge."

(3) The operating expenses are estimated to be 3.26% absent the anticipated
voluntary waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Investing in Class C Shares" and "Corporation
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 charges 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............................ $37 $81
You would pay the following expenses on the same investment, assuming
no redemption....................................................................... $26 $81
</TABLE>

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

SYNOPSIS

The Corporation was established under the laws of the state of Maryland on
January 25, 1994. The Corporation's address is 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. As of the date of this prospectus, the Board
of Directors (the "Directors") has established three classes of shares for the
Fund, known as Class A Shares, Class B Shares, and Class C Shares (individually
and collectively as the context requires, "Shares").

Shares of the Fund are designed for individuals and institutions seeking
long-term growth of capital by investing primarily in equity securities of Asian
and Pacific Rim companies.

For information on how to purchase Shares of the Fund, please refer to "How to
Purchase Shares." The minimum initial investment for Class A Shares is $500. The
minimum initial investment for Class B Shares and Class C Shares is $1,500.
However, the minimum initial investment for a retirement account in any class is
$50. Subsequent investments in any class must be in amounts of at least $100,
except for retirement plans which must be in amounts of at least $50.

Class B Shares are sold at net asset value. A contingent deferred sales charge
is imposed on certain Shares which are redeemed within six full years of
purchase. See "How to Redeem Shares."

Class C Shares are sold at net asset value. A contingent deferred sales charge
of 1.00% will be charged on assets redeemed within the first 12 months following
purchase. See "How to Redeem Shares."

In addition, the Fund also pays a shareholder services fee at an annual rate not
to exceed 0.25% of average daily net assets.

Additionally, information regarding the exchange privilege offered with respect
to the Fund and certain other funds for which affiliates of Federated Investors
serve as investment adviser or principal underwriter (the "Federated Funds") can
be found under "Exchange Privilege."

Federated Global Research Corp. is the investment adviser (the "Adviser") to the
Fund and receives compensation for its services. The Adviser's address is 175
Water Street, New York, New York 10038-4965.

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

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

The Fund pursues its investment objective by investing primarily in equity
securities of Asian and Pacific Rim companies. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity securities of
companies located in Asia and the Pacific Rim. The Fund may invest in securities
of issuers located in any country in Asia or the Pacific Rim where the Adviser
believes there is potential for above-average capital appreciation. Such
countries may include, but are not limited to: Australia, China, Hong Kong,
Indonesia, Japan, South Korea, Malaysia, New Zealand, Pakistan, the Philippines,
Singapore, Sri Lanka, Taiwan, Thailand, and those countries comprising the
Indian sub-continent. The Fund may invest in other countries in Asia and the
Pacific Rim when their markets become sufficiently developed, in the opinion of
the Adviser. The Fund intends to allocate its investments among at least three
countries at all times and does not expect to concentrate investments in any
particular industry.

ACCEPTABLE INVESTMENTS

COMMON AND PREFERRED STOCK

In selecting securities, the Adviser typically evaluates industry trends, a
company's financial strength, its competitive position in domestic and export
markets, technology, recent developments and profitability, together with
overall growth prospects. Other considerations generally include quality and
depth of management, government regulation, and availability and cost of labor
and raw materials. Investment decisions are made without regard to arbitrary
criteria as to minimum asset size, debt-equity ratios or dividend history of
portfolio companies.

DEPOSITARY RECEIPTS

DEBT SECURITIES

Adviser. Such dept securities are commonly known as "junk bonds." The prices of
fixed income securities generally fluctuate inversely to the direction of
interest rates. Please refer to the Appendix in this prospectus for a
description of these ratings.

CONVERTIBLE SECURITIES

The Fund may invest in convertible securities rated, at the time of purchase, as
low as C by S&P or Fitch or Moody's, or, if unrated, are of comparable quality
as determined by the Adviser.

Convertible securities are fixed income securities which may be exchanged or
converted into a predetermined number of the issuer's underlying common stock at
the option of the holder during a specified time period. Convertible securities
may take the form of convertible bonds, convertible preferred stock or
debentures, units consisting of "usable" bonds and warrants or a combination of
the features of several of these securities. The investment characteristics of
each convertible security vary widely, which allows convertible securities to be
employed for a variety of different investment strategies. In selecting a
convertible security, the Adviser evaluates the investment characteristics of
the convertible security as a fixed income investment, and the investment
potential of the underlying security for capital appreciation.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

RESTRICTED AND ILLIQUID SECURITIES

to be liquid, and repurchase agreements providing for settlement in more than
seven days after notice, to 15% of its net assets.

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements. Repurchase agreements are
arrangements by which the Fund purchases a security for cash and obtains a
simultaneous commitment from the seller (usually a bank or broker/dealer) to
repurchase the security at an agreed-upon price and specified future date. The
repurchase price reflects an agreed-upon interest rate for the time period of
the agreement. The Fund's risk is the inability of the seller to pay the
agreed-upon price on the delivery date. However, this risk is tempered by the
ability of the Fund to sell the security in the open market in the case of a
default. In such a case, the Fund may incur costs in disposing of the security
which would increase Fund expenses. The Adviser will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.

WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS

The Fund may dispose of a commitment prior to settlement if the Adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio securities
on a short-term or long-term basis, 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 Adviser
has determined are creditworthy under guidelines established by the Directors
and will receive collateral in the form of cash or U.S. government securities
equal to at least 100% of the value of the securities loaned at all times.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

TEMPORARY INVESTMENTS

For temporary defensive purposes, when the Adviser determines that market
conditions warrant (up to 100% of total assets) and to maintain liquidity (up to
35% of total assets), the Fund may invest in U.S. and foreign debt instruments
as well as cash or cash equivalents, including foreign and domestic money market
instruments, short-term

government and corporate obligations, and repurchase agreements.

FORWARD COMMITMENTS

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.

FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS

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 value of the
Fund's assets denominated in that currency at the time the contract was
initiated, but as consistent with their other investment policies and as not
otherwise limited in their ability to use this strategy.

OPTIONS

It is not certain that a secondary market for positions in options, or futures
contracts (see below), will exist at all times. Although the Adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.

FUTURES AND OPTIONS ON FUTURES

value of such futures contracts exceeds the total market value of the Fund's
portfolio securities. Futures contracts and options thereon sold by the Fund are
generally subject to segregation and coverage requirements established by either
the Commodities Futures Trading Commission ("CFTC") or the Securities and
Exchange Commission ("SEC"), with the result that, if the Fund does not hold the
instrument underlying the futures contract or option, the Fund will be required
to segregate on an ongoing basis with its custodian cash, U.S. government
securities, or other liquid high grade debt obligations in an amount at least
equal to the Fund's obligations with respect to such instruments.

The Fund may enter into securities index futures contracts to sell a securities
index in anticipation of or during a market decline to attempt to offset the
decrease in market value of securities in its portfolio that might otherwise
result. When the Fund is not fully invested and anticipates a significant market
advance, it may enter into futures contracts to purchase the index in order to
gain rapid market exposure that may in part or entirely offset increases in the
cost of securities that it intends to purchase. In many of these transactions,
the Fund will purchase such securities upon termination of the futures position
but, depending on market conditions, a futures position may be terminated
without the corresponding purchases of common stock. The Fund may also invest in
securities index futures contracts when the Adviser believes such investment is
more efficient, liquid, or cost-effective than investing directly in the
securities underlying the index.

An option on a securities index futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a securities index
futures contract. The Fund may purchase and write put and call options on
securities index futures contracts in order to hedge all or a portion of its
investment and may enter into closing purchase transactions with respect to
written options in order to terminate existing positions. There is no guarantee
that such closing transactions can be effected. The Fund may also invest in
options on securities index futures contracts when the Adviser believes such
investment is more efficient, liquid or cost-effective than investing directly
in the futures contract or in the securities underlying the index, or when the
futures contract or underlying securities are not available for investment upon
favorable terms.

The use of futures and related options involves special consideration and risks,
for example, (1) the ability of the Fund to utilize futures successfully will
depend on the Adviser's ability to predict pertinent market movements; (2) there
might be imperfect correlation, or even no correlation, between the change in
market value of the securities held by the Fund and the prices of the futures
and options thereon relating to the securities purchased or sold by the Fund.
The use of futures and related options may reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements but they
can also reduce the opportunity for gain by offsetting the positive effect of
favorable price movements in positions. No assurance can be given that the
Adviser's judgment in this respect will be correct.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the Adviser will consider
liquidity before entering into these transactions, there is no assurance that a
liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market.

RISKS OF FUTURES AND OPTIONS TRANSACTIONS

When the Fund uses futures and options on futures as hedging devices, there is a
risk that the prices of the securities subject to the futures contracts may not
correlate perfectly with the prices of the securities in the Fund's portfolio.
This may cause the futures contract and any related options to react differently
than the portfolio securities to market changes. In addition, the Adviser could
be incorrect in its expectations about the direction or extent of market factors
such as stock price movements. In these events, the Fund may lose money on the
futures contract or option.

SWAP AGREEMENTS

DERIVATIVE CONTRACTS AND SECURITIES

RISK CHARACTERISTICS OF FOREIGN SECURITIES

CURRENCY RISKS

FOREIGN COMPANIES

Other differences between investing in foreign and U.S. companies include:

- - less publicly available information about foreign issuers;

- - credit risks associated with certain foreign governments;

- - the lack of uniform accounting, auditing, and financial reporting standards
and practices or regulatory requirements comparable to those applicable to
U.S. companies;

- - less readily available market quotations on foreign issues;

- - differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;

- - differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;

- - the limited size of many foreign securities markets and limited trading volume
in issuers compared to the volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the quality of
securities;

- - the likelihood that securities of foreign issuers 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;

- - increased risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities;

- - certain markets may require payment for securities before delivery;

- - religious and ethnic instability; and

- - certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests.

U.S. GOVERNMENT POLICIES

INVESTING IN ASIA
AND THE PACIFIC RIM

RISK FACTORS RELATING
TO INVESTING IN HIGH YIELD
SECURITIES

The Fund's 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.

INVESTMENT LIMITATIONS

The Fund will not:

total assets and pledge its assets to secure such borrowings; or

The above investment limitations cannot be changed without shareholder approval.

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

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 each class of Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of each
class of Shares in the liabilities of the Fund and those attributable to each
class of Shares, and dividing the remainder by the total number of each class of
Shares outstanding. The net asset value for each class of Shares may differ due
to the variance in daily net income realized by each class. Such variance will
reflect only accrued net income to which the shareholders of a particular class
are entitled.

The net asset value of each class of Shares of the Fund is determined as of the
close of trading (normally 4:00 p.m., Eastern time) on 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.

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

INVESTING IN THE FUND

The Fund offers investors three classes of Shares that carry sales charges and
contingent deferred sales charges in different forms and amounts and which bear
different levels of expenses.

CLASS A SHARES

An investor who purchases Class A Shares pays a maximum sales charge of 5.50% at
the time of purchase. As a result, Class A Shares are not subject to any charges
when they are redeemed (except for special programs offered under "Purchases
with Proceeds From Redemptions of Unaffiliated Investment Companies"). Certain
purchases of Class A Shares are not subject to a sales charge. See "Investing in
Class A Shares." Certain purchases of Class A Shares qualify for reduced sales
charges. See "Reducing or Eliminating the Sales Charge." Class A Shares have no
conversion feature.

CLASS B SHARES

Class B Shares are sold without an initial sales charge, but are subject to a
contingent deferred sales charge of up to 5.50% if redeemed within six full
years following purchase. Class B Shares also bear a higher 12b-1 fee than Class
A Shares. Class B Shares will automatically convert into Class A Shares, based
on relative net asset value, on or around the fifteenth of the month eight full
years after the purchase date. Class B Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but (until conversion) will have a higher expense ratio and pay lower
dividends than Class A Shares due to the higher 12b-1 fee.

CLASS C SHARES

Class C Shares are sold without an initial sales charge, but are subject to a
1.00% contingent deferred sales charge on assets redeemed within the first 12
months following purchase. Class C Shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but will have a higher expense ratio and pay lower dividends than Class A
Shares due to the higher 12b-1 fee. Class C Shares have no conversion feature.

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

HOW TO PURCHASE SHARES

Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through a
financial institution (such as a bank or broker/dealer which has a sales
agreement with the distributor) or by wire or by check directly to the Fund,
with a minimum initial investment of $500 for Class A Shares and $1,500 for
Class B Shares and Class C Shares. Additional investments can be made for as
little as $100. The minimum initial and subsequent investment for retirement
plans is only $50. (Financial institutions may impose different minimum
investment requirements on their customers.)

In connection with any sale, 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. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.

INVESTING IN CLASS A SHARES

Class A 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 DEALER
SALES CHARGE AS A PERCENTAGE CONCESSION
A PERCENTAGE OF NET AS A PERCENTAGE
AMOUNT OF OF OFFERING AMOUNT OF PUBLIC
TRANSACTION PRICE INVESTED OFFERING PRICE
- -------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Less than
$50,000..... 5.50% 5.82% 5.00%
$50,000 but
less than
$100,000.... 4.50% 4.71% 4.00%
$100,000 but
less than
$250,000.... 3.75% 3.90% 3.25%
$250,000 but
less than
$500,000.... 2.50% 2.56% 2.25%
$500,000 but
less than $1
million..... 2.00% 2.04% 1.80%
$1 million or
greater..... 0.00% 0.00% 0.25%*
</TABLE>

* See sub-section entitled "Dealer Concession."

No sales charge is imposed for Class A Shares purchased through financial
intermediaries that do not receive a reallowance of a sales charge. However,
investors who purchase Shares through a trust department, investment adviser, or
other financial intermediary may be charged a service or other fee by the
financial intermediary. Additionally, no sales charge is imposed on shareholders
designated as Liberty Life Members or on Class A Shares purchased through "wrap
accounts" or similar programs, under which clients pay a fee for services.

DEALER CONCESSION

tional incentives, such as reimbursement of certain expenses of qualified
employees and their spouses to attend informational meetings about the Fund or
other special events at recreational-type facilities, or items of material
value. In some instances, these incentives will be made available only to
dealers whose employees have sold or may sell a significant amount of Shares. On
purchases of $1 million or more, the investor pays no sales charge; however, the
distributor will make twelve monthly payments to the dealer totaling 0.25% of
the public offering price over the first year following the purchase. Such
payments are based on the original purchase price of Shares outstanding at each
month end.

REDUCING OR ELIMINATING THE SALES CHARGE

The sales charge can be reduced or eliminated on the purchase of Class A Shares
through:

- - quantity discounts and accumulated purchases;

- - concurrent purchases;

- - signing a 13-month letter of intent;

- - using the reinvestment privilege; or

- - purchases with proceeds from redemptions of unaffiliated investment company
shares.
QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

If an additional purchase of Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $30,000 and he purchases $20,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 4.50%, not 5.50%.

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 Class A Shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after it
confirms the purchases.

CONCURRENT PURCHASES

LETTER OF INTENT

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of any Federated
Funds, excluding money market accounts, will be aggregated to provide a purchase
credit towards fulfillment of the letter of intent. Prior trade prices will not
be adjusted.

REINVESTMENT PRIVILEGE

If Class A Shares in the Fund have been redeemed, the shareholder has the
privilege, 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 Class A Shares in the Fund, there may be tax
consequences.

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED
INVESTMENT COMPANIES

Investors may purchase Class A Shares at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an unaffiliated
investment company that were purchased or sold with a sales charge or commission
and were not distributed by Federated Securities Corp. 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. From time to time, the Fund may offer dealers a
payment of .50 of 1.00% for Shares purchased under this program. If Shares are
purchased in this manner, Fund purchases will be subject to a contingent
deferred sales charge for one year from the date of purchase. Shareholders will
be notified prior to the implementation of any special offering as described
above.

INVESTING IN CLASS B SHARES

Class B Shares are sold at their net asset value next determined after an order
is received. While Class B Shares are sold without an initial sales charge,
under certain circumstances described under "Contingent Deferred Sales
Charge--Class B Shares," a contingent deferred sales charge may be applied by
the distributor at the time Class B Shares are redeemed.

CONVERSION OF CLASS B SHARES

change from Class B Shares of another Federated Fund will convert into Class A
Shares based on the time of the initial purchase. For purposes of conversion to
Class A Shares, Shares purchased through the reinvestment of dividends and
distributions paid on Class B Shares will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's account (other
than those in the sub-account) convert to Class A Shares, an equal pro rata
portion of the Class B Shares in the sub-account will also convert to Class A
Shares. The conversion of Class B Shares to Class A Shares is subject to the
continuing availability of a ruling from the Internal Revenue Service or an
opinion of counsel that such conversions will not constitute taxable events for
federal tax purposes. There can be no assurance that such ruling or opinion will
be available, and the conversion of Class B Shares to Class A Shares will not
occur if such ruling or opinion is not available. In such event, Class B Shares
would continue to be subject to higher expenses than Class A Shares for an
indefinite period.

Orders for $250,000 or more of Class B Shares will automatically be invested in
Class A Shares.

INVESTING IN CLASS C SHARES

Class C Shares are sold at their net asset value next determined after an order
is received. A contingent deferred sales charge of 1.00% will be charged on
assets redeemed within the first full 12 months following purchase. For a
complete description of this charge, see "Contingent Deferred Sales
Charge--Class C Shares."

PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION

The financial institution which maintains investor accounts in Class B Shares or
Class C Shares 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.

PURCHASING SHARES BY WIRE

Number or Dealer Number; Nominee or Institution Name; and ABA Number 011000028.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted. Questions on wire purchases should be directed to your shareholder
services representative at the telephone number listed on your account
statement.

PURCHASING SHARES BY CHECK

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM

RETIREMENT PLANS

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

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

EXCHANGE PRIVILEGE

CLASS A SHARES

CLASS B SHARES

Class B shareholders may exchange all or some of their Shares for Class B Shares
of other Federated Funds. (Not all Federated Funds currently offer Class B
Shares. Contact your financial institution regarding the availability of other
Class B Shares in the Federated Funds.) Exchanges are made at net asset value
without being assessed a contingent deferred sales charge on the exchanged
Shares. To the extent that a shareholder exchanges Shares for Class B Shares in
other Federated Funds, the time for which the exchanged-for Shares are to be
held will be added to the time for which exchanged-from Shares were held for
purposes of satisfying the applicable holding period. For more information, see
"Contingent Deferred Sales Charge."

CLASS C SHARES

will be added to the time for which exchanged-from Shares were held for purposes
of satisfying the applicable holding period. For more information, see
"Contingent Deferred Sales Charge."

The Fund has exchange privileges with the following Federated Funds:

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

REQUIREMENTS FOR EXCHANGE

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

TELEPHONE INSTRUCTIONS

ble procedures are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. Shares may be exchanged
between two funds by telephone only if the two funds have identical shareholder
registrations.

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HOW TO REDEEM SHARES

REDEEMING SHARES THROUGH
A FINANCIAL INSTITUTION

Shares of the Fund may be redeemed by calling your financial institution to
request the redemption. Shares will be redeemed at the net asset value, less any
applicable contingent deferred sales charge next determined after the Fund
receives the redemption request from 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
(such as banks) 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. Customary fees and commissions may be charged by the financial
institution for this service.

REDEEMING SHARES BY TELEPHONE

Shares may be redeemed in any amount by calling the Fund provided the Fund has a
properly completed authorization form. These forms can be obtained from
Federated Securities Corp.

Proceeds will be mailed in the form of a check, to the shareholder's address of
record or by wire transfer to the shareholder's account at a domestic commercial
bank that is a member of the Federal Reserve System. The minimum amount for a
wire transfer is $1,000. Proceeds from redeemed Shares purchased by check or
through ACH will not be wired until that method of payment has cleared. Proceeds
from redemption requests received on holidays when wire transfers are restricted
will be wired the following business day. Questions about telephone redemptions
on days when wire transfers are restricted should be directed to your
shareholder services representative at the telephone number listed on your
account statement.

REDEEMING SHARES BY MAIL

SPECIAL REDEMPTION FEATURES

SYSTEMATIC WITHDRAWAL PROGRAM

nancial institution. Due to the fact that Class A Shares are sold with a sales
charge, it is not advisable for shareholders to continue to purchase Class A
Shares while participating in this program. A contingent deferred sales charge
may be imposed on Class B Shares and Class C Shares.
CONTINGENT DEFERRED SALES CHARGE

Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:

CLASS A SHARES

CLASS B SHARES

Shareholders redeeming Class B Shares from their Fund accounts within six full
years of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed Shares at
the time of redemption in accordance with the following schedule:
<TABLE>
<CAPTION>
CONTINGENT
YEAR OF REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
- ----------------------------------- ------------
<S> <C>
First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
</TABLE>

CLASS C SHARES

Shareholders redeeming Class C Shares from their Fund accounts within one full
year of the purchase date of those Shares will be charged a contingent deferred
sales charge by the Fund's distributor of 1.00%. Any applicable contingent
deferred sales charge will be imposed on the lesser of the net asset value of
the redeemed Shares at the time of purchase or the net asset value of the
redeemed Shares at the time of redemption.

CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES

ferred sales charge, redemptions are deemed to have occurred in the following
order: (1) Shares acquired through the reinvestment of dividends and long-term
capital gains; (2) Shares held for more than six full years from the date of
purchase with respect to Class B Shares and one full year from the date of
purchase with respect to Class C Shares and applicable Class A Shares; (3)
Shares held for less than six years with respect to Class B Shares and less than
one full year from the date of purchase with respect to Class C Shares and
applicable Class A Shares on a first-in, first-out basis. A contingent deferred
sales charge is not assessed in connection with an exchange of Fund Shares for
shares of other Federated Funds in the same class (see "Exchange Privilege").
Any contingent deferred sales charge imposed at the time the exchanged-for
Shares are redeemed is calculated as if the shareholder had held the shares from
the date on which he became a shareholder of the exchanged-from Shares.
Moreover, the contingent deferred sales charge will be eliminated with respect
to certain redemptions (see "Elimination of Contingent Deferred Sales Charge").

ELIMINATION OF CONTINGENT
DEFERRED SALES CHARGE

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ACCOUNT AND SHARE INFORMATION

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder. Share certificates are not issued unless
requested in writing to Federated Shareholder Services Company.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.

DIVIDENDS

CAPITAL GAINS

Net long-term capital gains realized by the Fund, if any, will be distributed at
least once every twelve months.

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 Class A Share required
minimum value of $500 or the required minimum value of $1,500 for Class B Shares
and Class C Shares. This requirement does not apply, however, if the balance
falls below the required minimum value because of changes in the net asset value
of the respective Share Class. 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.

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

CORPORATION INFORMATION

MANAGEMENT OF THE CORPORATION
BOARD OF DIRECTORS

INVESTMENT ADVISER

Investment decisions for the Fund are made by Federated Global Research Corp.,
the Fund's investment adviser, subject to direction by the Directors. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.

ADVISORY FEES

ADVISER'S BACKGROUND
Federated Global Research Corp., incorporated in Delaware on May 12, 1995, is a
registered investment adviser under the Investment Advisers Act of 1940, as
amended. 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. Prior to September 1995, the Adviser had not
served as an investment adviser to mutual funds.

man & Co. from 1992 until 1995. He was the Executive Vice President and Director
of Equities at Oppenheimer Management Corporation from 1989 to 1991.

Both the Corporation and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Fund's shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Board of Directors,
and could result in severe penalties.

DISTRIBUTION OF SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

The distributor may offer to pay financial institutions an amount equal to 1% of
the net asset value of Class C Shares purchased by their clients or customers at
the time of purchase. These payments will be made directly by the distributor
from its assets, and will not be made from assets of the Fund. Financial
institutions may elect to waive the initial payment described above; such waiver
will result in the waiver by the Fund of the otherwise applicable contingent
deferred sales charge.

The distributor will pay dealers an amount equal to 5.5% of the net asset value
of Class B Shares purchased by their clients or customers. These payments will
be made directly by the distributor

from its assets, and will not be made from the assets of the Fund. Dealers may
voluntarily waive receipt of all or any portion of these payments. The
distributor may pay a portion of the distribution fee discussed below to
financial institutions that waive all or any portion of the advance payments.

DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), the distributor may be paid a fee in an amount
computed at an annual rate of up to 0.25 of 1% for Class A Shares and up to 0.75
of 1% for Class B Shares and Class C Shares of the average daily net assets of
each class of Shares to finance any activity which is principally intended to
result in the sale of Shares subject to the Distribution Plan. The Fund does not
currently make payments to the distributor or charge a fee under the
Distribution Plan for Class A Shares, and shareholders of Class A Shares will be
notified if the Fund intends to charge a fee under the Distribution Plan. For
Class A Shares and Class C Shares, the distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/ dealers to provide sales services or distribution-related
support services as agents for their clients or customers. With respect to Class
B Shares, because distribution fees to be paid by the Fund to the distributor
may not exceed an annual rate of 0.75 of 1% of Class B Shares' average daily net
assets, it will take the distributor a number of years to recoup the expenses it
has incurred for its sales services and distribution-related support services
pursuant to the Plan.

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25 of 1% of the average daily net asset value
of Class A Shares, Class B Shares, and Class C Shares to obtain certain personal
services for shareholders and for the maintenance of shareholder accounts
("Shareholder Services"). Under the Shareholder Services Agreement, 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.

In addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of sales services, distribution-related support
services, or shareholder services.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS

Federated Securities Corp. will pay financial institutions, at the time of
purchase of Class A Shares, an amount equal to 0.50 of 1% of the net asset value
of Class A Shares purchased by their clients or customers under certain
qualified retirement plans as approved by Federated Securities Corp. (Such
payments are subject to a reclaim from the financial institution should the
assets leave the program within 12 months after purchase.)

Furthermore, with respect to Class A Shares, Class B Shares, and Class C Shares,
Federated Securities Corp. and Federated Shareholder Services may offer to pay a
fee from their own assets to financial institutions as financial assistance for
providing substantial marketing and sales support. The support may include
sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance will be predicated upon
the amount of Shares the financial institution sells or may sell, and/or upon
the type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's Adviser or its affiliates.

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 Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- ------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>

EXPENSES OF THE FUND AND
CLASS A SHARES, CLASS B SHARES,
AND CLASS C SHARES

Holders of Class A Shares, Class B Shares, and Class C Shares pay their
allocable portion of Corporation and portfolio expenses.

The Corporation expenses for which holders of Class A Shares, Class B Shares,
and Class C 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.

At present, the only expenses which are allocated specifically to Class A
Shares, Class B Shares, and Class C Shares as classes are expenses under the
Corporation's Distribution Plan and fees for Shareholder Services. However, the
Directors reserve the right to allocate certain other expenses to holders of
Class A Shares, Class B Shares and Class C Shares as they deem 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 Class A Shares, Class B Shares, and Class C Shares;
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 to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Class A Shares, Class B Shares, and
Class C Shares; legal fees relating solely to Class A Shares, Class B Shares, or
Class C Shares; and Directors' fees incurred as a result of issues related
solely to Class A Shares, Class B Shares, or Class C Shares.

BROKERAGE TRANSACTIONS

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

SHAREHOLDER INFORMATION

VOTING RIGHTS

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

TAX INFORMATION

FEDERAL INCOME TAX

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. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares.

No federal income tax is due on any dividends earned in an IRA or qualified
retirement plan until distributed.

STATE AND LOCAL TAXES

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.

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

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for each class
of Shares.

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

The yield of each class of Shares is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by each class of Shares over a thirty-day period by the maximum offering price
per share of each class on the last day of the period. This number is then
annualized using semi-annual compounding. The yield does not necessarily reflect
income actually earned by each class of Shares and, therefore, may not correlate
to the dividends or other distributions paid to shareholders.

Total return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares. Expense differences among Class A Shares, Class B
Shares, and Class C Shares may affect the performance of each class.

From time to time, advertisements for Class A Shares, Class B Shares, and Class
C Shares of the Fund may refer to ratings, rankings, and other information in
certain financial publications and/or compare the performance of Class A Shares,
Class B Shares, and Class C Shares to certain indices.

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

APPENDIX

STANDARD AND POOR'S
RATINGS GROUP LONG TERM
DEBT RATING DEFINITIONS

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

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

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

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

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

AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally

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

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

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

FITCH INVESTORS SERVICE, INC.
LONG-TERM DEBT RATING
DEFINITIONS

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

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

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

MOODY'S INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATINGS

- -- Leading market positions in well established industries.

- -- High rates of return on funds employed.

- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.

- -- Broad margins in earning coverage of fixed financial charges and high
internal cash generation.

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

STANDARD AND POOR'S RATINGS
GROUP COMMERCIAL PAPER
RATINGS

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

FITCH INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATING
DEFINITIONS

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

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

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

FEDERATED ASIA PACIFIC GROWTH FUND
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

DISTRIBUTOR

Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

INVESTMENT ADVISER

Federated Global Research Corp.
175 Water Street
New York, New York 10038-4965

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600
Boston, Massachusetts 02266-8600

TRANSFER AGENT AND DIVIDEND

DISBURSING AGENT

Federated Shareholder Services Company

P.O. Box 8600
Boston, Massachusetts 02266-8600

INDEPENDENT AUDITORS

Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219

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

FEDERATED ASIA PACIFIC
GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT
SERIES, INC.)
CLASS A SHARES, CLASS B SHARES,
CLASS C SHARES
PROSPECTUS

An Open-End, Diversified
Management Investment Company

January 31, 1996

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

Distributor

A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779

Cusip 981487 50 7
Cusip 981487 60 6
Cusip 981487 70 5

G01470-02 (2/96)

FEDERATED ASIA PACIFIC GROWTH FUND
(A Portfolio of World Investment Series, Inc.)
Class A Shares, Class B Shares, Class C Shares

SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 31, 1996

A. Please insert the following as the last sentence of the section
entitled `Portfolio Turnover'' on page 11 of the Statement of Additional
Information:

`For the period from February 28, 1996 (date of initial public investment)
to May 31, 1996, the Fund's portfolio turnover rate was 37%.''

B. Please delete the paragraph under the section entitled ``Fund
Ownership'' on page 17 of the Statement of Additional Information and
replace it with the following:

`As of July 5, 1996, Officers and Directors of the Fund, as a group, owned
approximately 9,398 of the outstanding shares of the Fund (2.54%).
As of July 5, 1996, the following shareholders of record owned 5% or more
of the outstanding voting stock of the Fund's Class A Shares: Harmony Co.,
Carlise, PA, owned approximately 32,715 shares (8.86%), First National Bank
of Decatur, Decatur, IL, owned approximately 29,114 shares (7.88%),
Ssangyoung Securities America Inc., New York, NY, owned approximately
47,259 shares (12.80%), and Hudson United Bank, for the account of
Palisades Pension, West Orange, NJ, owned approximately 18,975 shares
(5.14%).
As of July 5, 1996, no shareholder of record owned 5% or more of the
outstanding voting stock of the Fund's Class B Shares.
As of July 5, 1996, the following shareholders of record owned 5% or more
of the outstanding voting stock of the Fund's Class C Shares: Merrill Lynch
Pierce Fenner & Smith, Jacksonville, FL, owned approximately 13,379 shares
(44.97%), State Street Bank and Trust for the IRA rollover of Dale E.
Stitzel, Hamilton, OH, owned approximately 2,376 shares (7.99%), and NFSC,
for the exclusive benefit of James D. Sperling, Harveys Lake, PA, owned
approximately 3,965 shares (13.33%).''

C. Please insert the following as the second sentence of the section
entitled `Advisory Fees'' on page 19 of the Statement of Additional
Information:

`For the period from February 28, 1996 (date of initial public investment)
to May 31, 1996, the Adviser earned $13,456, all of which was
voluntarily waived.''

D. Please insert the following as the last sentence of the first paragraph
of the section entitled `Brokerage Transactions''on page 19 of the
Statement of Additional Information:

`For the period from February 28, 1996 (date of initial public investment)
to May 31, 1996, the Fund paid $21,268 in brokerage commissions.''

E. Please delete the paragraph under the section entitled ``Fund
Administration''on page 20 of the Statement of Additional Information
and replace it with the following:

`Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
each prospectus. From January 31, 1996 to March 1, 1996, Federated
Administrative Services, also a subsidiary of Federated Investors, served
as the Fund's Administrator. For purposes of this Statement of Additional
Information, Federated Services Company and Federated Administrative
Services may hereinafter collectively be referred to as the
`Administrators.'' For the period from February 28, 1996 (date of initial
public investment) to May 31, 1996, the Administrators earned $48,524. Dr.
Henry J. Gailliot, an officer of Federated Global Research Corp., the
Adviser to the Fund, holds approximately 20% of the outstanding common
stock and serves as a director of Commercial Data Services, Inc., a company
which provides computer processing services to Federated Services
Company.''

F. Please insert the following as the final paragraph of the section
entitled `Distribution Plan and Shareholder Services Agreement''on page
20 of the Statement of Additional Information:

`For the period from February 28, 1996 (date of initial public investment)
to May 31, 1996, the Fund's Class B Shares and Class C Shares paid $718 and
$232, respectively, in distribution services fees, none of which were
voluntarily waived. Class A Shares have no present intention of paying or
accruing distribution services fees during the fiscal year ending November
30, 1996. In addition, for the period from February 28, 1996 (date of
initial public investment) to May 31, 1996, the Fund's Class A Shares,
Class B Shares and Class C Shares paid shareholder services fees in the
amount of $3,047, $239 and $77, respectively, none of which were
voluntarily waived.''

G. Please insert the following as the first paragraph of the section
entitled `Total Return'' on page 22 of the Statement of Additional
Information:

`The Fund's cumulative total return for Class A Shares, Class B Shares and
Class C Shares, for the period from February 28, 1996 (date of initial
public investment) to May 31, 1996, was 0.09%, 0.20% and 4.70%,
respectively. Cumulative total return reflects the Fund's total
performance over a specified period of time. The Fund's total return is
reflective of only three months of Fund activity since the Fund's date of
initial public investment.''

July 31, 1996

FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 981487507
Cusip 981487606
Cusip 981487705
G01739-03 (7/96)

FEDERATED ASIA PACIFIC GROWTH FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus for Class A Shares, Class B Shares, and Class C Shares, or
the stand-alone prospectus for Class A Shares of Federated Asia Pacific
Growth Fund (the "Fund") dated January 31, 1996. This Statement is not
a prospectus itself. You may request a copy of either prospectus or a
paper copy of this Statement of Additional Information, if you have
received it electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated January 31, 1996
FEDERATED SECURITIES CORP.
Distributor
A SUBSIDIARY OF FEDERATED INVESTORS

GENERAL INFORMATION ABOUT THE FUND 4

INVESTMENT OBJECTIVE AND POLICIES 4

Convertible Securities 4
Warrants 5
Sovereign Debt Obligations 5
When-Issued and Delayed Delivery Transactions 6
Lending of Portfolio Securities 6
Repurchase Agreements 7
Reverse Repurchase Agreements 7
Restricted and Illiquid Securities 8
Futures and Options 9
Foreign Currency Transactions 23
Special Considerations Affecting Asia and the Pacific
Rim 28
Special Considerations Affecting Emerging
Markets 29
Additional Risk Considerations 30
Portfolio Turnover 30
Investment Limitations 31
WORLD INVESTMENT SERIES, INC. MANAGEMENT 37

Fund Ownership 45
Directors Compensation 45
INVESTMENT ADVISORY SERVICES 48

Adviser to the Fund 48
Advisory Fees 48
Other Related Services 49

BROKERAGE TRANSACTIONS 49

OTHER SERVICES 50

Fund Administration 50
Custodian 50
Transfer Agent and Dividend Disbursing Agent 51
Independent Auditors 51
PURCHASING SHARES 51

Distribution Plan and Shareholder Services Agreement
51
Conversion to Federal Funds 52
Purchases by Sales Representatives, Directors, and
Employees of the Fund 52
DETERMINING NET ASSET VALUE 53

Determining Market Value of Securities 53
Trading in Foreign Securities 54
REDEEMING SHARES 54

Redemption in Kind 55
TAX STATUS 56

The Fund's Tax Status 56
Foreign Taxes 56
Shareholders' Tax Status 57
TOTAL RETURN 57

YIELD 57

PERFORMANCE COMPARISONS 58

ABOUT FEDERATED INVESTORS 62

Mutual Fund Market 62
Institutional Clients 63
Trust Organizations 63
Broker/Dealers and Bank Broker/Dealer Subsidiaries63

GENERAL INFORMATION ABOUT THE FUND

The Fund is a portfolio of 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 three classes known as Class A Shares,
Class B Shares, and Class C Shares (individually and collectively referred
to as `Shares'' as the context may require). This Statement of Additional
Information relates to all three classes of the above-mentioned Shares.
INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to provide long-term growth of
capital. Any income realized from the portfolio is incidental. The Fund
pursues its investment objective by investing primarily in equity
securities of Asian and Pacific Rim companies. The investment objective
cannot be changed without the approval of shareholders.
CONVERTIBLE SECURITIES
The convertible bonds and convertible preferred stocks in which the Fund
may invest generally retain the investment characteristics of fixed income
securities until they have been converted but also react to movements in
the underlying equity securities. The prices of fixed income securities
fluctuate inversely to the direction of interest rates. The holder is
entitled to receive the fixed income of a bond or the dividend preference
of a preferred stock until the holder elects to exercise the conversion
privilege. Usable bonds are corporate bonds that can be used in whole or
in part, customarily at full face value, in lieu of cash to purchase the
issuer's common stock.
Convertible securities are senior to equity securities, and therefore have
a claim to assets of the corporation prior to the holders of common stock
in the case of liquidation. However, convertible securities are generally

subordinated to similar nonconvertible securities of the same company. The
interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality. The
Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stocks when, in the
investment adviser's opinion, the investment characteristics of the
underlying common shares will assist the Fund in achieving it investment
objective. Otherwise, the Fund will hold or trade the convertible
securities.
WARRANTS
The Fund may invest in warrants. Warrants are options to purchase common
stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than a year to twenty years or
may be perpetual. However, most warrants have expiration dates after which
they are worthless. In addition, if the market price of the common stock
does not exceed the warrant's exercise price during the life of the
warrant, the warrant will expire as worthless. Warrants have no voting
rights, pay no dividends, and have no rights with respect to the assets of
the corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the optioned common stock.
SOVEREIGN DEBT OBLIGATIONS
The Fund may purchase sovereign debt instruments issued or guaranteed by
foreign governments or their agencies, including debt of countries with
emerging markets or developing countries. Sovereign debt may be in the
form of conventional securities or other types of debt instruments, such as
loans or loan participations. Sovereign debt of emerging market or

developing countries may involve a high degree of risk, and may be in
default or present the risk of default. Governmental entities responsible
for repayment of the debt may be unable or unwilling to repay principal and
interest when due, and may require renegotiation or rescheduling of debt
payments. In addition, prospects for repayment of principal and interest
may depend on political as well as economic factors. The Fund may also
invest in debt obligations of supranational entities, which include
international organizations designed or supported by governmental entities
to promote economic reconstruction or development, and international
banking institutions and related government agencies. Examples of these
include, but are not limited to, the International Bank for Reconstruction
and Development (World Bank), European Investment Bank and Inter-American
Development Bank.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. 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 are maintained until the transaction has been
settled. 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.
LENDING OF PORTFOLIO SECURITIES
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.
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 found by the Fund's investment adviser to be
creditworthy pursuant to guidelines established by the Corporation's Board
of Directors (the `Directors'').
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to

another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future, the Fund will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase agreements
may enable the Fund to avoid selling portfolio instruments at a time when a
sale may be deemed to be disadvantageous, but the ability to enter into
reverse repurchase agreements does not ensure that the Fund will be able to
avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Directors to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission (`SEC'') staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933, as amended (the `Rule''). The
Rule is a non-exclusive safe-harbor for certain secondary market
transactions involving securities subject to restrictions on resale under
federal securities laws. The Rule provides an exemption from registration
for resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule. The
Fund believes that the staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Directors.
The Directors may consider the following criteria in determining the
liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;

o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
Notwithstanding the foregoing, securities of foreign issuers which are not
listed on a recognized domestic or foreign exchange or for which a bona
fide market does not exist at the time of purchase or subsequent
transaction shall be treated as illiquid securities by the Directors.
FUTURES AND OPTIONS
The Fund may attempt to hedge all or a portion of its portfolio or gain
relatively rapid, liquid, and cost-effective exposure to certain markets by
buying and selling futures contracts and options on futures contracts.
FUTURES CONTRACTS
The Fund may engage in futures contracts. A futures contract is a
firm commitment by two parties, the seller who agrees to make delivery
of the specific type of security called for in the contract ("going
short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. However, a securities
index futures contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last
trading day of the contract and the price at which the index was
originally written. No physical delivery of the underlying securities
in the index is made.
The purpose of the acquisition or sale of a futures contract by the
Fund is to protect the Fund from fluctuations in the value of its
securities caused by unanticipated changes in interest rates or market
conditions without necessarily buying or selling the securities. For
example, in the fixed income securities market, price generally moves

inversely to interest rates. A rise in rates generally means a drop
in price. Conversely, a drop in rates generally means a rise in
price. In order to hedge its holdings of fixed income securities
against a rise in market interest rates, the Fund could enter into
contracts to deliver securities at a predetermined price (i.e., `go
short') to protect itself against the possibility that the prices of
its fixed income securities may decline during the anticipated holding
period. The Fund would `go long'' (i.e., agree to purchase securities
in the future at a predetermined price) to hedge against a decline in
market interest rates. The Fund may also invest in securities index
futures contracts when the investment adviser believes such investment
is more efficient, liquid, or cost-effective than investing directly
in the securities underlying the index.
STOCK INDEX OPTIONS
The Fund may purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter market. A stock
index fluctuates with changes in the market values of the stocks
included in the index.
The effectiveness of purchasing stock index options will depend upon
the extent to which price movements in the Fund's portfolio correlate
with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether the Fund will
realize a gain or loss from the purchase of options on an index
depends upon movements in the level of stock prices in the stock
market generally or, in the case of certain indices, in an industry or
market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on stock
indices will be subject to the ability of the investment adviser to

predict correctly movements in the direction of the stock market
generally or of a particular industry.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed or over-the-counter put options on
financial futures contracts. The Fund would use these options only to
protect portfolio securities against decreases in value resulting from
market factors such as anticipated increase in interest rates, or when
the investment adviser believes such investment is more efficient,
liquid or cost-effective than investing directly in the futures
contract or the underlying securities or when such futures contracts
or securities are unavailable for investment upon favorable terms.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles
(but does not obligate) its purchaser to decide on or before a future
date whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an
event, the Fund will normally close out its option by selling an
identical option. If the hedge is successful, the proceeds received by
the Fund upon the sale of the second option will be large enough to
offset both the premium paid by the Fund for the original option plus
the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Fund would
then deliver the futures contract in return for payment of the strike

price. If the Fund neither closes out nor exercises an option, the
option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
The Fund may write listed or over-the counter put options on financial
futures contracts to hedge its portfolio or when the investment
adviser believes such investment is more efficient, liquid or cost-
effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are
unavailable for investment upon favorable terms. When the Fund writes
a put option on a futures contract, it receives a cash premium which
can be used in whatever way is deemed most advantageous to the Fund.
In exchange for such premium, the Fund grants to the purchaser of the
put the right to receive from the Fund, at the strike price, a short
position in such futures contract, even though the strike price upon
exercise of the option is greater than the value of the futures
position received by such holder. If the value of the underlying
futures position is not such that exercise of the option would be
profitable to the option holder, the option will generally expire
without being exercised. The Fund has no obligation to return
premiums paid to it whether or not the option is exercised. It will
generally be the policy of the Fund, in order to avoid the exercise of
an option sold by it, to cancel its obligation under the option by
entering into a closing purchase transaction, if available, unless it
is determined to be in the Fund's interest to deliver the underlying
futures position. A closing purchase transaction consists of the
purchase by the Fund of an option having the same term as the option
sold by the Fund, and has the effect of canceling the Fund's position
as a seller. The premium which the Fund will pay in executing a
closing purchase transaction may be higher than the premium received

when the option was sold, depending in large part upon the relative
price of the underlying futures position at the time of each
transaction.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options or over-the-counter call options on financial and
stock index futures contracts (including cash-settled stock index
options), to hedge its portfolio against an increase in market
interest rates, a decrease in stock prices, or when the investment
adviser believes such investment is more efficient, liquid or cost-
effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are
unavailable for investment upon favorable terms. When the Fund writes
a call option on a futures contract, it is undertaking the obligation
of assuming a short futures position (selling a futures contract) at
the fixed strike price at any time during the life of the option if
the option is exercised. As stock prices fall or market interest rates
rise and cause the price of futures to decrease, the Fund's obligation
under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position
to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the
call, so that the Fund keeps the premium received for the option. This
premium can substantially offset the drop in value of the Fund's
portfolio securities.
Prior to the expiration of a call written by the Fund, or exercise of
it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the second

option will be less than the premium received by the Fund for the
initial option. The net premium income of the Fund may then
substantially offset the realized decrease in value of the hedged
securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but
not the obligation, to enter into the underlying futures contract at a
strike price determined at the time the call was purchased, regardless
of the comparative market of such futures position at the time the
option is exercised. The holder of a call option has the right to
receive a long (or buyer's) position in the underlying futures
contract.
The Fund generally will not maintain open positions in futures
contracts it has sold or call options it has written on futures
contracts if, in the aggregate, the value of the open positions
(marked to market) exceeds the current market value of its securities
portfolio plus the unrealized loss or minus the unrealized gain on
those open positions, adjusted for the correlation between the hedged
securities and the futures contracts. If this limitation is exceeded
at any time, the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and
options positions within this limitation.
``MARGIN'' IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of `initial margin'' in cash
or U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that

initial margin in futures transactions does not involve the borrowing
of funds by the Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called `variation margin,'' equal to the
daily change in value of the futures contract. This process is known
as `marking to market.'' Variation margin does not represent a
borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the
Fund will mark to market its open futures positions.
The Fund is also required to deposit and maintain margin when it
writes call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities in its
portfolio. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a
specified price during the term of the option. A call option gives the
Fund, in return for a premium, the right to buy the underlying
securities from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON PORTFOLIO SECURITIES
The Fund may write covered put and call options to generate income and
thereby protect against price movements in particular securities in
the Fund's portfolio. As the writer of a call option, the Fund has the
obligation upon exercise of the option during the option period to

deliver the underlying security upon payment of the exercise price. As
the writer of a put option, the Fund has the obligation to purchase a
security from the purchaser of the option upon the exercise of the
option.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount
of any additional consideration). In the case of put options, the Fund
will segregate cash or U.S. Treasury obligations with a value equal to
or greater than the exercise price of the underlying securities.
OVER-THE-COUNTER OPTIONS
The Fund may purchase and write over-the-counter options (`OTC
options') on portfolio securities or in securities indexes in
negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund or when the
securities indexes are not traded on an exchange.
OTC options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded
options have a continuous liquid market while OTC options may not.

result in losses greater than if they had not been used. Use of put
and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation
the Fund can realize on its investments or cause the Fund to hold a
security it might otherwise sell. The use of currency transactions
can result in the Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified
currency. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between
price movements of futures contracts and price movements in the
related portfolio position of the Fund creates the possibility that
losses on the hedging instrument may be greater than gains in the
value of the Fund's position. In addition, futures and options
markets may both be liquid in all circumstances and certain over-the-
counter options may have not markets. As a result, in certain
markets, the Fund might not be able to close out a transaction without
incurring substantial losses, if at all. Although the use of futures
and options transactions for hedging should tend to minimize the risk
of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result
from an increase in value of such position. Finally, the daily
variation margin requirements for futures contracts would create a
greater ongoing potential financial risk than would purchase of
options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of hedging strategies would

reduce net asset value, and possibly income, and such losses can be
greater than if the hedging strategies had not been utilized.
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transaction (including forward currency contracts) and multiple
interest rate transactions and any combination of futures, options,
currency and interest rate transactions (`component" transactions),
instead of a single hedging strategy, as part of a single or combined
strategy when, in the opinion of the investment adviser, it is in the
best interests of the Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its
component transactions. Although combined transactions are normally
entered into based on the investment adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively
achieve the desired portfolio management goal, it is possible that the
combination will instead increase such risks or hinder achievement of
the portfolio management objective.
SWAPS, CAPS, FLOORS AND COLLARS
Among the hedging strategies into which the Fund may enter are
interest rate, currency and index swaps and the purchase or sale of
related caps, floors, and collars. The Fund expects to enter into
these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against
currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund intends to use these
transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or

other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or
receive interest, e.g., an exchange of floating rating payments of
fixed rate payments with respect to a notional amount of principal. A
currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash
flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to
receive payments on a notional principal amount from the party selling
such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the
party selling such floor to the extent that specified index falls
below a predetermined interest rate or amount. A collar is a
combination of a cap and a floor that preserves a certain return
within a predetermined range of interest rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments.
Inasmuch as these swaps, caps, floors, and collars are entered into
for good faith hedging purposes, the investment adviser and the Fund
believe such obligations do not constitute senior securities under the
Investment Company Act of 1940, as amended, and, accordingly, will not
treat them as being subject to its borrowing restrictions. There is
no minimal acceptable rating for a swap, cap, floor, or collar to be
purchased or held in the Fund's portfolio. If there is a default by

the counterparty, the Fund may have contractual remedies pursuant to
the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and
investment banking firms acting both as principals and agents
utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are
more recent innovations for which standardized documentation has not
yet been fully developed and, accordingly, they are less liquid than
swaps.
RISKS OF HEDGING STRATEGIES OUTSIDE THE U.S.
When conducted outside the U.S., hedging strategies may not be
regulated as rigorously as in the U.S., may not involve a clearing
mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such
positions also could be adversely affected by: (i) other complex
foreign political, legal and economic factors, (ii) lesser
availability than in the U.S. of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the
U.S., (iv) the imposition of different exercise and settlement terms
and procedures and the margin requirements than in the U.S., and (v)
lower trading volume and liquidity.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many hedging strategies, in addition to other requirements, require
that the Fund segregate liquid high grade assets with its custodian to
the extent Fund obligations are not otherwise "covered" through
ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the

Fund to pay or deliver securities or assets must be covered at all
times by the securities, instruments or currency required to be
delivered, or, subject to any regulatory restrictions, an amount of
cash or liquid high grade securities at least equal to the current
amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to
segregate them. For example, a call option written by the Fund will
require the Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate liquid high grade securities sufficient
to purchase and deliver the securities if the call is exercised. A
call option sold by the Fund on an index will require the Fund to own
portfolio securities which correlate with the index or to segregate
liquid high grade assets equal to the excess of the index value over
the exercise price on a current basis. A put option written by the
Fund requires the Fund to segregate liquid high grade assets equal to
the exercise price.
Except when the Fund enters into a forward contract for the purchase
or sale of a security denominated in a particular currency, a currency
contract which obligates the Fund to buy or sell currency will
generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's
obligations or to segregate liquid high grade assets equal to the
amount of the Fund's obligations.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OTC issued and exchange
listed index options, will generally provide for cash settlement. As
a result, when the Fund sells these instruments it will only segregate

an amount of assets equal to its accrued net obligations, as there is
no requirement for payment or delivery of amounts in excess of the net
amount. These amounts will equal 100% of the exercise price in the
case of a non cash-settled put, the same as an OTC guaranteed listed
option sold by the Fund, or the in-the-money amount plus any sell-back
formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when
the in-the-money amount exceeds the exercise price, the Fund will
segregate, until the option expires or is closed out, cash or cash
equivalents equal in value to such excess. OTC issued and exchange
listed options sold by the Fund other than those above generally
settle with physical delivery, and the Fund will segregate an equal
amount of assets equal to the full value of the option. OTC options
settling with physical delivery, or with an election of either
physical delivery or cash settlement will be treated the same as other
options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possibly daily variation margin in addition
to segregating assets sufficient to meet its obligation to purchase or
provide securities or currencies, or to pay the amount owed at the
expiration of an index-based futures contract. Such assets may
consist of cash, cash equivalents, liquid debt or equity securities or
other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect
to each swap on a daily basis and will segregate an amount of cash or
liquid high grade securities having a value equal to the accrued
excess. Caps, floors and collars require segregation of assets with a
value equal to the Fund's net obligation, if any.

Strategic transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into
offsetting transactions so that its combined position, coupled with
any segregated assets, equals its net outstanding obligation in
related options and hedging strategies. For example, the Fund could
purchase a put option if the strike price of that option is the same
or higher than the strike price of a put option sold by the Fund.
Moreover, instead of segregating assets if the Fund held a futures or
forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the
price of the contract held. Other hedging strategies may also be
offset in combinations. If the offsetting transaction terminates at
the time of or after the primary transaction no segregation is
required, but if it terminates prior to such time, assets equal to any
remaining obligation would need to be segregated.
The Fund's activities involving hedging strategies may be limited by
the requirements of Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code") for qualification as a regulated investment
company. (See "Tax Status")
FOREIGN CURRENCY TRANSACTIONS
CURRENCY RISKS
The exchange rates between the U.S. dollar and foreign currencies are
a function of such factors as supply and demand in the currency
exchange markets, international balances of payments, governmental
intervention, speculation and other economic and political conditions.
Although the Fund values its assets daily in U.S. dollars, the Fund
may not convert its holdings of foreign currencies to U.S. dollars
daily. The Fund may incur conversion costs when it converts its
holdings to another currency. Foreign exchange dealers may realize a

profit on the difference between the price at which the Fund buys and
sells currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its portfolio investments. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange
market or through forward contracts to purchase or sell foreign
currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
order to protect against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and a foreign
currency involved in an underlying transaction. However, forward
foreign currency exchange contracts may limit potential gains which
could result from a positive change in such currency relationships.
The investment adviser believes that it is important to have the
flexibility to enter into forward foreign currency exchange contracts
whenever it determines that it is in the Fund's best interest to do
so. The Fund will not speculate in foreign currency exchange.
The Fund will not enter into forward foreign currency exchange
contracts or maintain a net exposure in such contracts when it would
be obligated to deliver an amount of foreign currency in excess of the
value of its portfolio securities or other assets denominated in that
currency or, in the case of a "cross-hedge" denominated in a currency
or currencies that the investment adviser believes will tend to be
closely correlated with that currency with regard to price movements.
Generally, the Fund will not enter into a forward foreign currency
exchange contract with a term longer than one year.

FOREIGN CURRENCY OPTIONS
A foreign currency option provides the option buyer with the right to
buy or sell a stated amount of foreign currency at the exercise price
on a specified date or during the option period. The owner of a call
option has the right, but not the obligation, to buy the currency.
Conversely, the owner of a put option has the right, but not the
obligation, to sell the currency.
When the option is exercised, the seller (i.e., writer) of the option
is obligated to fulfill the terms of the sold option. However, either
the seller or the buyer may, in the secondary market, close its
position during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally rises in value if the underlying currency
depreciates in value. Although purchasing a foreign currency option
can protect the Fund against an adverse movement in the value of a
foreign currency, the option will not limit the movement in the value
of such currency. For example, if the Fund was holding securities
denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the
value of the currency, the Fund would not have to exercise its put
option. Likewise, if the Fund were to enter into a contract to
purchase a security denominated in foreign currency and, in
conjunction with that purchase, were to purchase a foreign currency
call option to hedge against a rise in value of the currency, and if
the value of the currency instead depreciated between the date of
purchase and the settlement date, the Fund would not have to exercise
its call. Instead, the Fund could acquire in the spot market the
amount of foreign currency needed for settlement.

SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain
risks associated with foreign currency options. The markets in foreign
currency options are relatively new, and the Fund's ability to
establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not
purchase or write such options unless and until, in the opinion of the
investment adviser, the market for them has developed sufficiently to
ensure that the risks in connection with such options are not greater
than the risks in connection with the underlying currency, there can
be no assurance that a liquid secondary market will exist for a
particular option at any specific time.
In addition, options on foreign currencies are affected by all of
those factors that influence foreign exchange rates and investments
generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the
price of the option position may vary with changes in the value of
either or both currencies and may have no relationship to the
investment merits of a foreign security. Because foreign currency
transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign
currency options, investors may be disadvantaged by having to deal in
an odd lot market (generally consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available

through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of
very large transactions in the interbank market and thus may not
reflect relatively smaller transactions (i.e., less than $1 million)
where rates may be less favorable. The interbank market in foreign
currencies is a global, around-the-clock market. To the extent that
the U.S. option markets are closed while the markets for the
underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets until they reopen.
FOREIGN CURRENCY FUTURES TRANSACTIONS
By using foreign currency futures contracts and options on such
contracts, the Fund may be able to achieve many of the same objectives
as it would through the use of forward foreign currency exchange
contracts. The Fund may be able to achieve these objectives possibly
more effectively and at a lower cost by using futures transactions
instead of forward foreign currency exchange contracts.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS
Buyers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the use of futures generally. In
addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those
associated with options on currencies, as described above.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures
contracts is relatively new. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid
secondary market. To reduce this risk, the Fund will not purchase or

write options on foreign currency futures contracts unless and until,
in the opinion of the investment adviser, the market for such options
has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with transactions
in the underlying foreign currency futures contracts. Compared to the
purchase or sale of foreign currency futures contracts, the purchase
of call or put options on futures contracts involves less potential
risk to the Fund because the maximum amount at risk is the premium
paid for the option (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on a futures
contract would result in a loss, such as when there is no movement in
the price of the underlying currency or futures contract.
SPECIAL CONSIDERATIONS AFFECTING ASIA AND THE PACIFIC RIM
Investment in securities of issuers domiciled in Japan and Hong Kong
entails special considerations. Overseas trade is important to Japan's
economy. Japan has few natural resources and must export to pay for its
imports of these basic requirements. Because of the concentration of
Japanese exports in highly visible products, Japan has had difficult
relations with its trading partners, particularly the U.S., where the trade
imbalance is the greatest. It is possible that trade sanctions or other
protectionist measures could impact Japan adversely in both the short and
the long term. The Japanese securities markets are less regulated than
those in the United States. Evidence has emerged from time to time of
distortion of market prices to serve political or other purposes.
Shareholders' rights are not always equally enforced.
Hong Kong is a British colony which will transfer sovereignty to the
Peoples Republic of China in 1997. China has espoused policies
antagonistic to free enterprise capitalism and democracy. There can be no
guarantee that property rights will continue to be safeguarded in Hong

Kong after 1997, although recently, China has moved toward free enterprise,
and has established stock exchanges of its own.
Some Southeast Asian countries also may have managed currencies, which are
not free floating against the U.S. dollar. In addition, there is the risk
that certain Southeast Asian countries may restrict the free conversion of
their currencies into other currencies. Further, certain Southeast Asian
currencies may not be internationally traded. Any devaluations in
currencies in which the Fund's portfolio securities are denominated may
have a detrimental impact on the Fund's net asset value.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS
Investing in the securities of issuers domiciled in emerging markets,
including certain Asian markets such as Taiwan, Malaysia and Indonesia, may
entail special risks relating to the potential political and economic
instability and the risks of expropriation, nationalization, confiscation
or the imposition of restrictions on foreign investment, convertibility of
currencies into U.S. dollars and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation by
any country, the Fund could lose its entire investment in any such country.
Emerging securities markets are substantially smaller, less developed,
less liquid and more volatile than the major securities markets. The
limited size of emerging securities markets and limited trading volume in
issuers compared to the volume of trading in U.S. securities could cause
price to be erratic for reasons apart from factors that affect the quality
of the securities. For example, limited market size may cause prices to be
unduly influenced by traders who control large positions. Adverse
publicity and investors' perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of portfolio securities in
these markets. In addition, securities traded in certain emerging markets
may be subject to risks due to the inexperience of financial

intermediaries, a lack of modern technology, the lack of a sufficient
capital base to expand business operations, and the possibility of
permanent or temporary termination of trading.
Settlement mechanisms in emerging securities markets may be less efficient
and less reliable than in more developed markets. In such emerging
securities markets there may be share registration and delivery delays or
failures.
ADDITIONAL RISK CONSIDERATIONS
The Directors consider at least annually the likelihood of the imposition
by any foreign government of exchange control restrictions which would
affect the liquidity of the Fund's assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of
foreign governments to which such assets may be exposed. The Directors
also consider the degree of risk involved through the holding of portfolio
securities in domestic and foreign securities depositories. However, in
the absence of willful misfeasance, bad faith or gross negligence on the
part of the investment adviser, any losses resulting from the holding of
the Fund's portfolio securities in foreign countries and/or with securities
depositories will be at the risk of shareholders. No assurance can be
given that the Directors' appraisal of the risks will always be correct or
that such exchange control restrictions or political acts of foreign
governments might not occur.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the
investment adviser believes it is appropriate to do so in light of the
Fund's investment objective, without regard to the length of time a
particular security may have been held. The investment adviser does not
anticipate that portfolio turnover will result in adverse tax consequences.

It is not anticipated that the portfolio trading engaged in by the Fund
will result in its annual rate of portfolio turnover exceeding 100%;
however, the relative performance of the Fund's investments may make a
realignment of the Fund's portfolio desirable from time to time. The
frequency of such portfolio realignments will be determined by market
conditions. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly.
INVESTMENT LIMITATIONS
The following investment limitations are fundamental (except that no
investment limitation of the Fund shall prevent the Fund from investing
substantially all of its assets (except for assets which are not considered
`investment securities'' under the Investment Company Act of 1940, as
amended, or assets exempted by the SEC) in an open-end investment company
with substantially the same investment objectives):
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as are necessary for
the clearance of purchases and sales of portfolio securities. The
deposit or payment by the Fund of initial or variation margin in
connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets, including
the amount borrowed, and except to the extent that the Fund may enter
into futures contracts. The Fund will not borrow money or engage in
reverse repurchase agreements for investment leverage, but rather as a

temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while any borrowings in excess of 5% of its total assets
are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In these cases, the Fund may pledge
assets as necessary to secure such borrowings. For purposes of this
limitation, the following will not be deemed to be pledges of the
Fund's assets: (a) the deposit of assets in escrow in connection with
the writing of covered put or call options and the purchase of
securities on a when-issued basis; and (b) collateral arrangements
with respect to: (i) the purchase and sale of securities options (and
options on securities indexes) and (ii) initial or variation margin
for futures contracts.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets
in any one industry, except that the Fund may invest 25% or more of
the value of its total assets in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities.
INVESTING IN COMMODITIES
The Fund will not invest in commodities, except that the Fund reserves
the right to engage in transactions involving futures contracts,
options, and forward contracts with respect to securities, securities
indexes or currencies.

INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the securities of
companies whose business involves the purchase or sale of real estate
or in securities which are secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities.
This shall not prevent the Fund from purchasing or holding U.S.
government obligations, corporate bonds, money market instruments,
debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by the Fund's investment objective,
policies, and limitations or the Corporation's Articles of
Incorporation.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items, or securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result, more
than 5% of the value of its total assets would be invested in the
securities of that issuer, and will not acquire more than 10% of the
outstanding voting securities of any one issuer.

The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval (except that no investment
limitation of the Fund shall prevent the Fund from investing substantially
all of its assets (except for assets which are not considered `investment
securities''under the Investment Company Act of 1940, as amended, or
assets exempted by the SEC) in an open-end investment company with
substantially the same investment objectives). Shareholders will be
notified before any material changes in these limitations become effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, and will invest no more than 10% of its total
assets in investment companies in general. The Fund will purchase
securities of 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, or acquisition of assets. It should be noted
that investment companies incur certain expenses such as management
fees, and, therefore, any investment by the Fund in shares of another
investment company would be subject to such duplicate expenses.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable time
deposits with maturities over seven days, over-the-counter options,
swap agreements not determined to be liquid, and certain restricted
securities not determined by the Directors to be liquid.

INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets
in securities of issuers with records of less than three years of
continuous operations, including the operation of any predecessor.
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 the Fund's 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.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest
in the securities of issuers which invest in or sponsor such programs.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities or futures
contracts, unless the securities or futures contracts 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.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the
securities or futures contracts 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.

INVESTING IN WARRANTS
The Fund will not invest more than 5% of the value of its net assets
in warrants, including those acquired in units or attached to other
securities. No more than 2% of the Fund's net assets, to be included
within the overall 5% limit on investments in warrants, may be
warrants which are not listed on the New York or American Stock
Exchanges. For purposes of this investment restriction, warrants will
be valued at the lower of cost or market, except that warrants
acquired by the Fund in units with or attached to securities may be
deemed to be without value.
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.
The Fund has no present intent to borrow money, pledge securities, or
invest in reverse repurchase agreements in excess of 5% of the value of its
total assets in the coming fiscal year. In addition, the Fund expects to
lend not more than 5% of its total assets in the coming fiscal year.
To comply with registration requirements in certain states, the Fund
(1) will limit the aggregate value of the assets underlying covered call
options or put options written by the Fund to not more than 25% of its net
assets, (2) will limit the premiums paid for options purchased by the Fund
to 5% of its net assets, and (3) will limit the margin deposits on futures
contracts entered into by the Fund to 5% of its net assets. (If state
requirements change, these restrictions may be revised without shareholder
notification.)
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,

and undivided profits in excess of $100,000,000 at the time of investment
to be `cash items.''
WORLD INVESTMENT SERIES, INC. MANAGEMENT

Officers and Directors are listed with their addresses, birthdates, present
positions with World Investment Series, Inc., and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or Managing
General Partner of the Funds. Mr. Donahue is the father of J. Christopher
Donahue, Executive Vice President of the Company.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of the
Funds; formerly, President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of the
Funds.

Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President and Director
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674

Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the
Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; founding Chairman,
National Advisory Council for Environmental Policy and Technology and
Federal Emergency Management Advisory Board.

Marjorie P. Smuts

4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Administrative Services, Federated
Shareholder Services Company, and Federated Shareholder Services; Director,
Federated Services Company; President or Executive 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
Company.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Chairman, Treasurer, and
Trustee, Federated Administrative Services; Trustee or Director of some of
the Funds; President, Executive Vice President and Treasurer of some of the
Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.

David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947

Treasurer
Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated
Securities Corp.; Treasurer of some of the Funds.

* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board between meetings of
the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Government Money Trust; Blanchard Funds;
Blanchard Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series,
Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 3-5 Years; 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; Insurance Management Series; Intermediate Municipal

Trust; International Series, Inc.; 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; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The
Shawmut 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; The Virtus Funds; and
World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding Shares.

DIRECTORS COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION *# FROM FUND COMPLEX +

John F. Donahue $0 $0 for the Corporation and
Chairman and Director 54 other investment companies in the Fund
Complex

Thomas G. Bigley++ $253 $86,331 for the Corporation and
Director 54 other investment companies in the Fund
Complex

John T. Conroy, Jr. $833 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex

William J. Copeland $833 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex

James E. Dowd $833 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Lawrence D. Ellis, M.D. $758 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Richard B. Fisher$0 $0 for the Corporation and
President and Director 6 other investment companies in the Fund
Complex

Edward L. Flaherty, Jr. $833 $115,760 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Peter E. Madden $758 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Gregor F. Meyer $758 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

John E. Murray, Jr. $758 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Wesley W. Posvar $758 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

Marjorie P. Smuts$758 $104,898 for the Corporation and
Director 54 other investment companies in the Fund
Complex

*Information is furnished for the fiscal year ended November 30, 1995.
#The aggregate compensation is provided for the Corporation, which was
comprised of 1 portfolio, as of
November 30, 1995.
+The information is provided for the last calendar year end.
++Mr. Bigley served on 39 investment companies in the Federated Funds
Complex from January 1 through September 30, 1995. On October 1, 1995, he
was appointed a Trustee/Director on 15 additional Federated Funds.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Global Research Corp. (the
"Adviser"). It is a subsidiary of Federated Investors. All the voting
securities of Federated Investors are owned by a trust, the trustees of
which are John F. Donahue, his wife, and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Corporation, the Fund, 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, the Adviser receives an annual investment
advisory fee as described in each prospectus.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
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 single fiscal year, by the amount of the
investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order to
facilitate the purchase of shares of funds offered by Federated Securities
Corp.
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. Research services provided by brokers and dealers may be used by
the Adviser or its affiliates in advising the Fund 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. 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 persons are reasonable in relationship to
the value of the brokerage and research services provided.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund

and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
The Adviser may engage in other non-U.S. transactions that may have adverse
effects on the market for securities in the Fund's portfolio. The Adviser
is not obligated to obtain any material non-public (`inside'') information
about any securities issuer, or to base purchase or sale recommendations on
such information.
OTHER SERVICES

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600, is transfer agent for the Shares of the Fund, and
dividend disbursing agent for the Fund. The fee paid to the transfer agent
is based upon the size, type, and number of accounts and transactions made
by shareholders.
Federated Shareholder Services Company also maintains the Fund's accounting
records. The fee paid for this service is based upon the level of the
Fund's average net assets for the period plus out-of-pocket expenses.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, One Oxford
Centre, Pittsburgh, Pennsylvania 15219.
PURCHASING SHARES

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.
By adopting the Distribution Plan, the Directors expect that the Class A
Shares, Class B Shares, and Class C Shares of 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; (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. Federated Shareholder Services Company acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
PURCHASES BY SALES REPRESENTATIVES, DIRECTORS, AND EMPLOYEES OF THE FUND
Directors, employees, and sales representatives of the Fund, Federated
Global Research Corp., 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 Class A
Shares at net asset value without a sales charge. Shares may also be sold

without a sales charge to trusts or pension or profit-sharing plans for
these people.
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.
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 each prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities, other than options, are
determined as follows:
o for equity securities, according to the last sale price in the market
in which they are primarily traded (either a national securities
exchange or the over-the-counter market), if available;
o in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
o for bonds and other fixed income securities, as determined by an
independent pricing service;
o for short-term obligations, according to the prices as furnished by an
independent pricing service, except that short-term obligations with
remaining maturities of less than 60 days at the time of purchase may
be valued at amortized cost; and
o for all other securities, at fair value as determined in good faith by
the Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: insititutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data.

The Fund will value futures contracts and options at their market values
established by the exchanges on which they are traded at the close of
trading on such exchanges unless the Directors determine in good faith that
another method of valuing such investments is necessary.
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 Directors,
although the actual calculation may be done by others.
REDEEMING SHARES

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.
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 of each class of Shares of the Fund may be
significantly affected on days when shareholders do not have an opportunity
to redeem their Shares.
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 respective Fund's
portfolio. To the extent available, such securities will be readily
marketable.
The Corporation has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, as amended, 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 respective class's net asset value during any 90-day
period.
Any redemption beyond this amount will also be in cash unless the Directors
determine that payment should be in kind. In such a case, the Fund will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way as the Fund determines net asset value.

The portfolio instruments will be selected in a manner that the Directors
deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
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 of 1986, as
amended, 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:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o 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.
FOREIGN TAXES
Investment income on certain foreign securities in which the Fund may
invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United

States and foreign countries, however, may reduce or eliminate the amount
of foreign taxes to which the Fund would be subject.
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 each class 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 charge, 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.
YIELD

by the maximum offering price per share of the respective class on the last
day of the period. This value is 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 a 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 any
class of Shares, the performance will be reduced for those shareholders
paying those fees.
PERFORMANCE COMPARISONS

any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS (S&P
500), 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 S & P 500 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 the Standard & Poor's figures.
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specified period of time. From time to time,
the Fund will quote its Lipper ranking in the "pacific region funds"
category in advertising and sales literature.
o 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.
o IBBOTSON ASSOCIATES INTERNATIONAL BOND INDEX, which provides a
detailed breakdown of local market and currency returns since 1960.
o BEAR STEARNS FOREIGN BOND INDEX, which provides simple average returns
for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.

o MORNINGSTAR, INC. , an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
o Data and mutual fund rankings published or prepared by
CDA/WIESENBERGER INVESTMENT COMPANY SERVICES that ranks and/or
compares mutual funds by overall performance, investment objectives,
assets, expense levels, periods of existence and/or other factors.
o FINANCIAL TIMES ACTUARIES INDICES--including the FTA-World Index (and
components thereof), which are based on stocks in major world equity
markets.
o 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.
o DOW JONES INDUSTRIAL AVERAGE (`DJIA'') represents share prices of
selected blue-chip industrial corporations. The DJIA indicates daily
changes in the average price of stock of these corporations. Because
it represents the top corporations of America, the DJIA index is a
leading economic indicator for the stock market as a whole.
O CNBC/FINANCIAL NEWS COMPOSITE INDEX.
O THE WORLD BANK PUBLICATION OF TRENDS IN DEVELOPING COUNTRIES (TIDE).
TIDE provides brief reports on most of the World Bank's borrowing
members. The World Development Report is published annually and looks
at global and regional economic trends and their implications for the
developing economies.
o SALOMON BROTHERS GLOBAL TELECOMMUNICATIONS INDEX is composed of
telecommunications companies in the developing and emerging countries.

o DATASTREAM, INTERSEC, FACTSET, IBBOTTSON ASSOCIATES, AND WORLDSCOPE
are database retrieval services for information including, but not
limited to, international financial and economic data.
o INTERNATIONAL FINANCIAL STATISTICS, which is produced by the
International Monetary Fund.
o Various publications and annual reports produced by the World Bank and
its affiliates.
o Various publications from the International Bank for Reconstruction
and Development.
o Various publications including, but not limited to, ratings agencies
such as Moody's Investors Service, Inc., Fitch Investors Service, Inc.
and Standard & Poor's Ratings Group.
o WILSHIRE ASSOCIATES, which is an on-line database for international
financial and economic data including performance measures for a wide
range of securities.
o INTERNATIONAL FINANCE CORPORATION (IFC) EMERGING MARKETS DATA BASE,
which provides detailed statistics on stock and bond markets in
developing countries, including IFC market indices.
o Various publications from the Organization for Economic Cooperation
and Development (OECD).
From time to time, the Fund may quote information including but not limited
to data regarding: individual countries, regions, world stock exchanges,
and economic and demographic statistics from sources deemed reliable.
Advertisements and other sales literature for any class 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 any class of Shares based on annual reinvestment of
dividends over a specified period of time.

From time to time as it deems appropriate, the Fund may advertise the
performance of any class of Shares using charts, graphs, and descriptions,
compared to federally insured bank products including certificates of
deposit and time deposits and to money market funds using the Lipper
Analytical Services money market instruments average. In addition,
advertising and sales literature for the Fund may use charts and graphs to
illustrate the principles of dollar-cost averaging and may disclose the
amount of dividends paid by the Fund over certain periods of time.
Advertisements may quote performance information which does not reflect the
effect of the sales charge on Class A Shares.
ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and

institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients
is headed by John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort
to these firms is headed by James F. Getz, President, Broker/Dealer
Division.
*source: Investment Company Institute
Cusip 981487 50 7
Cusip 981487 60 6

Cusip 981487 70 5

FEDERATED EMERGING MARKETS FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)

CLASS A SHARES

SEMI-ANNUAL REPORT AND SUPPLEMENT TO THE PROSPECTUS DATED JANUARY 31, 1996

A. Please delete the third and fourth sentence of the fourth paragraph on
the cover page of the prospectus and replace it with the following:

B. Please insert the following "Financial Highlights" table for Class A
Shares immediately following the "Summary of Fund Expenses" table in the
prospectus:

FEDERATED EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>

PERIOD ENDED
(UNAUDITED)
MAY 31, 1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06
Net realized and unrealized gain (loss) on investments and foreign currency 0.66
Total from investment operations 0.72
NET ASSET VALUE, END OF PERIOD $10.72
TOTAL RETURN(B) 7.20%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.97%*
Net investment income 1.88%*
Expense waiver/reimbursement(c) 8.94%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $4,565
Average commission rate paid $0.0005
Portfolio turnover 4%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to May 31, 1996.

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

(See Notes which are an integral part of the Financial Statements)

C. Please delete the final sentence of the section entitled "Making an
Exchange" on page 20 of the prospectus and replace it with the following:

D. Please add the following as the fourth sentence of the section entitled
"How to Redeem Shares" on page 21 of the prospectus:

"Investors who redeem shares through a financial institution may be charged
a service fee by that institution."

F. Please add the following as the last sentence of the first paragraph of
the section entitled "Voting Rights" on page 29 of the prospectus:

"As of July 5, 1996, Merrill Lynch Pierce Fenner & Smith, Jacksonville, FL,
owned 79.27% of the voting securities of the Fund's Class C Shares, and,
therefore, may, for certain purposes, be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders."

G. Please insert the following financial statements beginning on page 32 of
the prospectus, immediately before the section entitled "Appendix."

FEDERATED EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--86.4%
AUTOMOBILE--3.4%
1,100 (a)Bajaj Auto, Ltd., GDR $ 43,175
3,500 (a)(b)Mahindra and Mahindra, GDR 38,500
14,000 PT United Tractors 25,509
2,800 Salvador Caetano Industrias Metalurgicas e Veiculos de
Transporte S.A. 35,082
2,000 (b)Tata Engineering & Locomotive Co. Ltd., GDR 36,000
Total 178,266
BANKING--11.5%
666 Alpha Credit Bank 33,183
2,714 Banco Commercial Portugues, Class R 33,418
1,200 Banco O'Higgins, ADR 27,300
1,500 Banco Totta & Acores Nationalisiert, Class B 29,408
16,100 (a)Banco Wiese 27,189
1,400 (a)Bank Rozwoju Eksportu S.A. 34,174
500 (a)Bank Slaski S.A. 36,615
3,000 (a)Bansud S.A., Class B 35,414
5,000 Commerce Asset Holdings Bhd 33,647
900,000 Demirbank T.A.S. 28,631
15,900 Grupo Financiero Banamex, Class B 35,988
477 Grupo Financiero Banamex, Class L 1,003
6,700 Krung Thai Bank PLC 34,127
11,000 (a)Mauritius Commercial Bank 41,918
7,000 PT Bank International Indonesia 36,538
24,000 PT Bank Tiara Asia 31,125
2,200 (a)Philippine National Bank 38,866
</TABLE>

FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
BANKING--CONTINUED
71,000 (a)State Bank Mauritius $ 30,143
2,900 Thai Farmers Bank Co. 33,207
Total 601,894
BASIC INDUSTRY--1.0%
5,000 (a)Rogers and Company Ltd. 26,343
11,598 (a)United Docks Limited 25,510
Total 51,853
BEVERAGE & TOBACCO--5.7%
20,000 (a)Cervecer Backus & Johnson, Class T 28,642
1,400 Compania Cervecerias Unidas SA, ADR 31,872
800 Embotelladora Andina S.A., ADR 28,400
45,000 Erciyas Biracilik Ve Malt Sanayii 23,478
13,500 Fomento Economico Mexicano, SA de C.V., Class B 39,923
800 Hellenic Bottling Co., S.A. 27,695
3,297 (a)Mauritius Breweries Ltd. 21,081
7,500 (a)Nobleza Piccardo S.A.I.C. y F. 28,887
2,500 PT Hanjaya Mandala Sampoerna 31,056
600 (a)Prazske Pivovary A.S. 39,024
Total 300,058
BROADCASTING & PUBLISHING--0.7%
2,300 (a)Grupo Televisa SA 35,635
BUILDING MATERIALS & COMPONENTS--2.4%
8,000 (a)Cemex SA, Class B 31,903
8,000 PT Semen Gresik 26,495
20,000 (a)Sanitary Wares Manufacturing Corp. 3,209
8,000 Sungei Way Holdings Bhd. 34,929
600 Titan Cement Co. 28,998
Total 125,534
</TABLE>

FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
CHEMICALS--3.7%
102,200 (a)Aksa Akrilik Kimya Sanayii AS $ 19,600
73,000 Aksa Akrilik Kimya Sanayii AS, Rights 0
1,200 CIN-Corparacao Industrial do Norte SA 29,246
1,500 (a)Debica S.A. 33,541
18,200 (b)Indo Gulf Fertilizer & Chemical 144-A, GDR 30,940
32,000 (a)Petkim Petrokimya Holding A.S. 13,845
6,700 (a)Polifarb-Cieszyn SA 34,707
2,000 (a)Reliance Industries, GDR 30,500
Total 192,379
CONSTRUCTION & HOUSING--1.4%
2,300 Empresas ICA Sociedad Controladora S.A. 33,466
6,000 (a)Somague-Sociedade Gestora de Participacoes 39,135
Total 72,601
ELECTRICAL & ELECTRONICS--1.0%
400,000 EEI Corp. 38,961
85,000 Netas Telekomunik 17,036
Total 55,997
ELECTRONIC COMPONENTS, INSTRUMENTS--1.1%
5,400 Hana Microelectronics Co., Ltd. 33,689
61,200 Shanghai Diesel Engine Co. Ltd., Class B 24,235
Total 57,924
ENERGY - OIL & GAS--2.1%
1,900 (a)Huaneng Power International Inc., Class N, ADR 31,113
1,800 (a)Lukoil Oil Co., ADR 55,800
63,000 (a)Mauritius Oil Refineries Ltd. 24,491
Total 111,404
</TABLE>

FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY EQUIPMENT & SERVICES--0.6%
2,400 Transportadora de Gas de Sur S.A., Class B, ADR $ 30,600
ENERGY SOURCES--0.6%
2,600 (a)MOL Magyar Olaj-es Gazipari RT 30,193
ENGINEERING--1.3%
2,900 Ergas 24,904
600 (a)Vodni Stavby Praha A.S. 43,144
Total 68,048
FINANCIAL SERVICES--1.4%
8,400 (a)Industrial Finance Corporation of Thailand 37,811
9,000 Rashid Hussain Bhd 33,527
Total 71,338
FOOD & HOUSEHOLD PRODUCTS--0.8%
500 Estabelecimentos Jeronimo Martins & Filho SGPS, S.A. 39,771
FOOD PROCESSING--1.7%
65,000 D'Onofrino S.A. 23,945
17,211 (a)Mon Tresor & Mon Desert Ltd. 32,485
700 (a)Pick Szeged Rt 31,012
Total 87,442
FOREST PRODUCTS & PAPER--0.2%
160,000 Kartonsan Karton Sanayi Ve Ticaret AS 13,438
HEALTH & PERSONAL CARE--2.7%
1,800 Kimberly-Clark de Mexico 33,272
13,000 (a)PT Darya Varia Laboratoria 27,310
1,560 (a)PT Darya Varia Laboratoria, Rights 0
2,670 (b)Pliva D.D., GDR 81,435
Total 142,017
</TABLE>

FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
HOUSEHOLD APPLIANCES--1.0%
41,500 Shanghai Shangling Electric Appliances Co. Ltd., Class B $ 27,805
3,100 Singer Thailand 26,439
Total 54,244
INDUSTRIAL COMPONENTS--0.4%
3,100 (a)Fabryka Kotlow Rafako S.A. 21,951
INSURANCE--1.3%
200 (a)Ceska Pojistovna 38,482
16,977 (a)Swan Insurance Co., Ltd. 29,525
Total 68,007
LEISURE & TOURISM--1.5%
2,800 (a)Danubius Hotels Rt 47,458
17,000 (a)Sun Resorts Ltd. 30,609
Total 78,067
MACHINERY & ENGINEERING--1.4%
5,400 (a)CKD Praha Holding A.S. 36,098
20,000 Tractors Malaysia Holdings Bhd 38,454
Total 74,552
MANUFACTURING--1.3%
600 (a)Ceska Zbrojovka A.S. 33,604
900 (a)Zalakeramia Rt 36,550
Total 70,154
MERCHANDISING--0.6%
42,000 (a)Migros Turk 31,533
METALS - NON FERROUS--3.2%
700 Aluminum of Greece S.A. 32,728
5,033 (a)Cia de Minas Buenaventura S.A. 43,726
800 (a)(b) Hindalco Industries Ltd., GDR 35,600
1,000 Madeco S.A., ADR 26,750
</TABLE>

FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
METALS - NON FERROUS--CONTINUED
600 (a)Sociedad Quimica Y Minera De Chile, ADR $ 31,050
Total 169,854
METALS - STEEL--0.8%
50,000 (a)Acindar Industria Argentina de Aceros S.A. 39,516
MINING--0.7%
1,200 Banpu Public Company Ltd. 34,494
MISCELLANEOUS MATERIALS & COMMODITIES--1.2%
1,400 Hellas Can Packaging Manufacturers, S.A. 29,620
66,000 Sinocan Holdings Ltd. 31,775
Total 61,395
MULTI-INDUSTRY--5.1%
2,400 Alfa, S.A. de C.V., Class A 38,930
6,000 Compania Naviera Perez Companc S.A., Class B 38,295
90,000 (a)EnkaHolding Yatirim 27,200
16,000 First Philippine Holdings Corp., Class B 40,947
4,500 (a)Grupo Carso S.A. de CV 33,102
144,000 (a)Koc Yatirim Ve Sanayi Mamulleri Pazarlama S.A. 20,156
120,000 (a)Koc Yatirim Ve Sanayi Mamulleri Pazarlama S.A., Rights 0
21,700 (a)Ledesma Agricola S.A. 34,191
1,200 (a)Skoda Koncern Plzen A.S. 34,472
Total 267,293
PHARMACEUTICALS--3.3%
900 (a)EGIS 45,008
900 Gedeon Richter RT 37,758
2,700 (a)Jelfa S.A. 30,992
2,400 Laboratorio Chile, ADR 32,700
1,100 (b)Ranbaxy Laboratories, GDR 144-A, GDR 25,300
Total 171,758
</TABLE>

FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
REAL ESTATE--2.6%
22,000 Ayala Land, Inc., Class B $ 37,815
200,000 (a)Guoco Holdings (Philippines) 53,476
172,000 (a)Robinson's Land Corp., Class B 44,018
Total 135,309
TOBACCO--0.5%
3,000 (b)ITC Ltd., GDR 25,290
TELECOMMUNICATIONS--7.3%
1,500 Advanced Information Services 24,757
2,370 (a)(b)Hellenic Telecommunications Organization 39,525
20,000 Nizhny Novgordo Svyazinform, RDC 42,000
18,000 (a)PT Telekomunikasi Indonesia 27,395
1,200 (a)Portugal Telecom S.A. 29,009
30,000 (a)Rostelecom RDC 51,000
300 (a)SPT Telekom A.S. 36,152
27,000 (a)Tele 2000 S.A.- La Nueva Com de Telefonos 46,155
7,714 (a)Telecomunicacoes de Sao Paulo S.A., Rights 391
14,000 (a)Telefonica Del Peru CPT, Class B 27,699
11,000 Telefonica de Argentina S.A., Class B 32,133
3,200 Telex-Chile S.A., ADR 27,200
Total 383,416
TEXTILES & APPAREL--0.6%
2,100 (a)Indian Rayon & Industries Ltd., GDR 31,500
TRANSPORTATION - ROAD & RAIL--1.3%
1,950 (a)Guangshen Railway Co. Ltd., Class H, ADR 38,513
39,000 (a)Shanghai Dazhong Taxi Co., Class B 28,080
Total 66,593
</TABLE>

FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>

VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
TRANSPORTATION - SHIPPING--1.1%
12,000 Kelang Container Terminal $ 29,561
4,000 (a)Transportacion Maritima Mexicana S.A., Class A 27,753
Total 57,314
UTILITIES - ELECTRICAL & GAS--6.7%
800 (a)CEZ A.S. 35,122
8,000 (a)Central Puerto S.A., Class B 28,812
7,000 (a)Cesc Limited-Sponsored, GDR 21,000
1,100 Enersis S.A., ADR 32,313
10,000 Irkutskenergo, RDC 67,500
3,400 Manila Electric Co., Class B 34,740
4,300 (a)(b)Mosenergo, ADR 95,675
900 (a)Prvni Severozapadni 37,724
Total 352,886
WHOLESALE & INTERNATIONAL TRADE--1.2%
5,400 Elektrim Spolka Akcyina S.A. 36,224
20,800 (a)Enrique Ferreyros S.A. 26,517
Total 62,741
TOTAL COMMON STOCKS (IDENTIFIED COST $4,217,968) 4,524,259
PREFERRED STOCKS--4.6%
BANKING--1.2%
2,700,000 Banco Bradesco S.A., Preference 31,371
80,000 Banco Itau S.A., Preference 32,415
Total 63,786
BEVERAGE & TOBACCO--0.6%
50,000 (a)Cia Cervejaria Brahma, Preference 29,801
ENERGY SOURCES--0.6%
270,000 (a)Petroleo Brasileiro S.A., Preference 32,590
</TABLE>

FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>

SHARES VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
MERCHANDISING--0.4%
1,200,000 (a)Lojas Americanas S.A., Preference $ 22,610
METALS - STEEL--0.6%
27,000,000 Usinas Siderurgicas de Minas Gerais, Pfd. 29,457
TELECOMMUNICATIONS--0.7%
180,000 (a)Telecomunicacoes de Sao Paulo S.A., Preference 38,045
UTILITIES - ELECTRICAL & GAS--0.5%
100,000 (a)Centrais Eletricas Brasileiras, Preference, Series B 25,844
TOTAL PREFERRED STOCKS (IDENTIFIED COST $231,917) $ 242,133
(C)REPURCHASE AGREEMENT--7.6%
$ 400,000 BT Securities Corporation, 5.34%, dated 5/31/1996, due 6/3/1996
(AT AMORTIZED COST) 400,000
TOTAL INVESTMENTS (IDENTIFIED COST $4,849,885)(D) $ 5,166,392
</TABLE>

(a) Non-income producing security.

(b) Denotes a restricted security which is subject to restrictions on resale
under securities laws. At May 31, 1996, these securities amounted to
$408,265 which represents 7.8% of net assets.

(c) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement are through
participation in joint accounts with other Federated Funds.

(d) The cost of investments for federal tax purposes amounts to $4,849,885.
The net unrealized appreciation of investments on a federal tax basis
amounts to $316,507 which is comprised of $542,713 appreciation and $226,206
depreciation at May 31, 1996.

Note: The categories of investments are shown as a percentage of net assets
($5,238,598) at May 31, 1996.

The following acronym(s) are used throughout this portfolio:

ADR -- American Depository Receipt

GDR -- Global Depository Receipts

PLC -- Public Limited Company

RDC -- Russian Depository Certificate

(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost
$4,849,885) $ 5,166,392
Cash 5,088
Income receivable 16,711
Receivable for shares sold 69,250
Total assets 5,257,441
LIABILITIES:
Payable for foreign taxes withheld $ 1,344
Accrued expenses 17,499
Total liabilities 18,843
Net Assets for 488,614 shares outstanding $ 5,238,598
NET ASSETS CONSIST OF:
Paid in capital $ 4,877,711
Net unrealized appreciation of investments and translation of assets and
liabilities in
foreign currency 316,507
Accumulated net realized gain on investments and foreign currency
transactions 20,029
Undistributed net investment income 24,351
Total Net Assets $ 5,238,598
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($4,565,269 O 425,712 shares outstanding) $10.72
Offering Price Per Share (100/94.50 of $10.72)* $11.34
Redemption Proceeds Per Share $10.72
CLASS B SHARES:
Net Asset Value Per Share ($571,531 O 53,395 shares outstanding) $10.70
Offering Price Per Share $10.70
Redemption Proceeds Per Share (94.50/100 of $10.70)** $10.11
CLASS C SHARES:
Net Asset Value Per Share ($101,798 O 9,507 shares outstanding) $10.71
Offering Price Per Share $10.71
Redemption Proceeds Per Share (99.00/100 of $10.71)** $10.60
* See "How to Purchase Shares" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
</TABLE>

FEDERATED EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1996 (UNAUDITED)(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $2,732) $ 37,896
Interest (net of foreign taxes withheld of $2,112) 12,993
Total income 50,889
EXPENSES:
Investment advisory fee $ 16,532
Administrative personnel and services fee 48,524
Custodian fees 31,819
Transfer and dividend disbursing agent fees and expenses 6,906
Legal fees 2,911
Portfolio accounting fees 23,632
Distribution services fee -- Class B Shares 357
Distribution services fee -- Class C Shares 67
Shareholder services fee -- Class A Shares 3,165
Shareholder services fee -- Class B Shares 119
Shareholder services fee -- Class C Shares 22
Share registration costs 2,068
Printing and postage 5,169
Insurance premiums 1,723
Miscellaneous 1,723
Total expenses 144,737
Waivers and reimbursements --
Waiver of investment advisory fee $(16,532)
Reimbursement of other operating expenses (101,667)
Total waivers and reimbursements (118,199)
Net expenses 26,538
Net investment income 24,351
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain on investments and foreign
currency transactions 20,029
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 316,507
Net realized and unrealized gain on investments and
foreign currency 336,536
Change in net assets resulting from operations $ 360,887
</TABLE>

(a) For the period from February 28, 1996 (date of initial
public investment) to May 31, 1996.
(See Notes which are an integral part of the Financial Statements)

FEDERATED EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

PERIOD ENDED
(UNAUDITED)
MAY 31, 1996(A)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 24,351
Net realized gain (loss) on investments and foreign currency
transactions ($20,029, as computed for federal tax purposes) 20,029
Net change in unrealized appreciation (depreciation) of
investments and translation of assets and liabilities
in foreign currency 316,507
Change in net assets resulting from operations 360,887
SHARE TRANSACTIONS--
Proceeds from sale of shares 9,193,462
Cost of shares redeemed (4,315,751)
Change in net assets resulting from share transactions 4,877,711
Change in net assets 5,238,598
NET ASSETS:
Beginning of period --
End of period (including undistributed net investment income of
$24,351) $5,238,598
</TABLE>

(a) For the period from February 28, 1996 (date of initial public
investment) to May 31, 1996.

(See Notes which are an integral part of the Financial Statements)

FEDERATED EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)

1. ORGANIZATION

World Investment Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of six portfolios.
The financial statements included herein are only those of Federated
Emerging Markets Fund (the "Fund"), a diversified portfolio. The financial
statements of the other portfolios are presented separately. The assets of
each portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The Fund offers three classes of shares:
Class A Shares, Class B Shares and Class C Shares. The investment objective
of the Fund is to provide long-term growth of capital.

2. SIGNIFICANT ACCOUNTING POLICIES

FEDERATED EMERGING MARKETS FUND

At May 31, 1996, the diversification by country was as follows:
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS COUNTRY % OF NET ASSETS
<S> <C> <S> <C>
Argentina 5.1% Malaysia 3.3%
Brazil 4.6% Mauritius 5.0%
Chile 4.5% Mexico 5.9%
China 3.5% Peru 4.3%
Croatia 1.6% Philippines 5.6%
Czecholsovakia 6.4% Poland 4.4%
Greece 4.1% Portugal 4.5%
Hungary 4.4% Russia 6.0%
India 6.1% Thailand 4.3%
Indonesia 3.9% Turkey 3.7%
</TABLE>

FOREIGN EXCHANGE CONTRACTS -- The Fund may enter into foreign currency
exchange contracts as a way of managing foreign exchange rate risk. The Fund
may enter into these contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date as a hedge or cross hedge
against either specific transactions or portfolio positions. The objective
of the Fund's foreign currency hedging transactions is to reduce the risk
that the U.S. dollar value of the Fund's foreign currency denominated
securities will decline in value due to changes in foreign currency exchange
rates. All foreign currency exchange contracts are "marked to market" daily
at the applicable translation rates resulting in unrealized gains or losses.
Realized gains or losses are recorded at the time the foreign currency
exchange contract is offset by entering into a closing transaction or by the
delivery or receipt of the currency. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. As of May 31, 1996 the Fund
had no foreign exchange contracts outstanding.

FEDERATED EMERGING MARKETS FUND

Additional information on each restricted security held at May 31, 1996 is
as follows:
<TABLE>
<CAPTION>

SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Mahindra and Mahindra, GDR 2/28/96 $30,625
Tata Engineering & Locomotive Co. Ltd GDR 2/28/96 29,000
Indo Gulf Fertilizer & Chemical 2/28/96 29,120
Pliva D.D. GDR 3/30/96 49,956
Hellenic Telecommunication Organizations 4/4/96 39,389
Hindalco Industries Ltd, GDR 3/1/96 29,520
Ranbaxy Laboratories, GDR 2/28/96 30,258
ITC Ltd., GDR 3/1/96 2,889
Mosenergo, ADR 3/12/96 30,659
</TABLE>

OTHER -- Investment transactions are accounted for on the trade date.

3. CAPITAL STOCK

At May 31, 1996, par value shares ($ 0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>

# OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 150,000,000
Class B Shares 150,000,000
Class C Shares 150,000,000
Total 450,000,000
</TABLE>

FEDERATED EMERGING MARKETS FUND

Transactions in capital stock were as follows:
<TABLE>
<CAPTION>

PERIOD ENDED
MAY 31, 1996(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 839,934 $ 8,520,752
Shares redeemed (414,222) (4,296,901)
Net change resulting from Class A share transactions 425,712 $ 4,223,851
</TABLE>

PERIOD ENDED
MAY 31, 1996(B)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 53,395 $ 555,095
Net change resulting from Class B share transactions 53,395 $ 555,095
</TABLE>

PERIOD ENDED
MAY 31, 1996(B)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 11,323 $ 117,615
Shares redeemed (1,816) (18,850)
Net change resulting from Class C share transactions 9,507 $ 98,765
Net change resulting from share transactions 488,614 4,877,711
</TABLE>

(a) For the period from February 28, 1996 (date of intial public investment)
to May 31, 1996.

(b) For the period from February 28, 1996 (date of intial public offering)
to May 31, 1996.

FEDERATED EMERGING MARKETS FUND

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser, (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.25% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its fee
and/or reimburse certain operating expenses of the Fund. The Adviser can
modify or terminate this voluntary waiver and/or reimbursement at any time
at its sole discretion.

% OF AVG. DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>

Class A shares did not incur a Distribution services fee for the period
ended May 31, 1996, and has no present intention of paying or accruing a
Distribution services fee.

SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services, the Fund will pay Federated
Shareholder Services up to 0.25% of average daily net assets of the Fund
shares for the period. The fee paid to Federated Shareholder Services is
used to finance certain services for shareholders and to maintain
shareholder accounts.

FEDERATED EMERGING MARKETS FUND

ORGANIZATIONAL EXPENSES -- Organizational expenses of $48,748 were borne
initially by Adviser. The Fund has agreed to reimburse Adviser for the
organizational expenses during the five-year period following effective
date. For the period ended May 31, 1996, no payments were made by the Fund
pursuant to this agreement.

GENERAL -- Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $4,569,119
SALES $ 112,218
</TABLE>

FEDERATED
EMERGING
MARKETS
FUND

CLASS A SHARES
SEMI-ANNUAL REPORT AND
SUPPLEMENT TO PROSPECTUS
DATED JANUARY 31, 1996

[Graphic]
Federated Investors
Since 1955

Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 981487804
G01741-02 (7/96)

[Graphic]

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

FEDERATED EMERGING MARKETS FUND
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
PROSPECTUS

The Class A Shares of Federated Emerging Markets Fund (the "Fund") represent
interests in a diversified portfolio of World Investment Series, Inc. (the
"Corporation"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to provide long-term growth of capital. Any
income received from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in a professionally managed
portfolio of securities of issuers and companies domiciled in or having primary
operations in emerging markets.

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

The Fund has also filed a Statement of Additional Information for Class A
Shares, Class B Shares, and Class C Shares dated January 31, 1996, with the
Securities and Exchange Commission. The information contained in the Statement
of Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Statement of Additional Information, or a paper copy
of this prospectus, if you have received your prospectus electronically, free of
charge by calling 1-800-235-4669. To obtain other information or to make
inquiries about the Fund, contact your financial institution.

Prospectus dated January 31, 1996

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

TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1

General Information............................................................2

Investment Information.........................................................3

Investment Objective.........................................................3

Investment Policies..........................................................3

Investment Limitations......................................................14

Net Asset Value...............................................................15

How to Purchase Shares........................................................15

What Shares Cost............................................................16

Special Purchase Features...................................................18

Exchange Privilege............................................................19
How to Redeem Shares..........................................................21

Special Redemption Features.................................................22

Contingent Deferred Sales Charge............................................22

Elimination of Contingent Deferred
Sales Charge.............................................................23

Account and Share Information.................................................24

Corporation Information.......................................................25

Management of the Corporation...............................................25

Distribution of Class A Shares..............................................26

Administration of the Fund..................................................27

Expenses of the Fund and
Class A Shares...........................................................28

Brokerage Transactions......................................................28

Shareholder Information.......................................................29

Voting Rights...............................................................29

Tax Information...............................................................29

Federal Income Tax..........................................................29

State and Local Taxes.......................................................30

Performance Information.......................................................30

Other Classes of Shares.......................................................31

Appendix......................................................................32

Addresses.....................................................................35

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

SUMMARY OF FUND EXPENSES

FEDERATED EMERGING MARKETS FUND
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)...................... 5.50%
Maximum Sales Charge 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)........................................................ 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)................................. None
Exchange Fee....................................................................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(2)................................................................... 0.35%
12b-1 Fee(3)....................................................................................... 0.00%
Total Other Expenses............................................................................... 1.62%
Shareholder Services Fee................................................................ 0.25%
Total Operating Expenses(4).................................................................... 1.97%
</TABLE>

(3) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1996. If Class A Shares were
paying or accruing the 12b-1, the Class A Shares would be able to pay up to
0.25% of its average daily net assets for the 12b-1 fee. See "Corporation
Information."

(4) The operating expenses are estimated to be 2.87% absent the anticipated
voluntary waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "What Shares Cost" and "Corporation 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............................. $79 $113
You would pay the following expenses on the same investment, assuming no redemption.... $74 $113
</TABLE>

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

GENERAL INFORMATION

The Corporation was established under the laws of the State of Maryland on
January 25, 1994. The Corporation's address is 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. As of the date of this prospectus, the Board
of Directors (the "Directors") has established three classes of shares for the
Fund, known as Class A Shares, Class B Shares, and Class C Shares. This
prospectus relates only to Class A Shares (the "Shares") of the Fund.

Shares of the Fund are designed for individuals and institutions seeking
long-term growth of capital by investing primarily in a portfolio of common
stocks of emerging market companies.

In general, Class A Shares are sold at net asset value plus the applicable sales
charge and are redeemed at net asset value. However, a contingent deferred sales
charge is imposed under certain circumstances. For a more complete description,
see "How to Redeem Shares."

In addition, the Fund pays a shareholder services fee at an annual rate not to
exceed 0.25% of average daily net assets.

Investors should be aware of the following general observations. The Fund may
make certain investments and employ certain investment techniques that involve
risks, including, but not limited to, investing in foreign securities, lending
portfolio securities, investing in restricted and illiquid securities, investing
in securities on a when-issued and delayed delivery basis, writing call options
and entering into repurchase agreements.

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

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

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide long-term growth of capital.
Any income received from the portfolio is incidental. The investment objective
cannot be changed without approval of shareholders. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing primarily in a
professionally managed and diversified portfolio of securities of issuers and
companies located in countries having emerging markets. Under normal market
conditions, the Fund intends to invest at least 65% of its total assets in
equity securities of issuers and companies located in countries having emerging
markets.

The Fund expects to diversify investments across emerging markets in Latin
America, Asia, Europe, the Middle East and Africa. The Fund intends to allocate
its investments among at least three countries at all times and does not expect
to concentrate investments in any particular industry.

Unless indicated otherwise, the investment policies of the Fund may be changed
by the Directors without the approval of shareholders. Shareholders will be
notified before any material changes in these policies become effective.

EMERGING MARKETS

In managing the Fund's portfolio, the Fund's investment adviser considers
countries having emerging markets to be all countries that are generally
considered to have developing or emerging markets or economies. Furthermore, the
Fund's investment adviser considers emerging market countries to be all
countries considered by the International Bank for Reconstruction and
Development (more commonly known as the World Bank) and the International
Finance Corporation, as well as countries that are classified by the United
Nations or otherwise regarded by their authorities, as developing.

Under normal circumstances the Fund will invest at least 65% of its total assets
in, among others, the following countries: Argentina, Bolivia, Botswana, Brazil,
Chile, China, Colombia, Cyprus, Czech Republic, Ecuador, Egypt, Ghana, Greece,
Hong Kong, Hungary, India, Indonesia, Jamaica, Jordan, Kenya, Korea, Malaysia,
Mauritius, Mexico, Morocco, Nigeria, Oman, Pakistan, Peru, Philippines, Poland,
Portugal, Russia, Singapore, Slovakia, South Africa, Sri Lanka, Swaziland,
Taiwan, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe. The Fund
may invest in countries other than those defined above, if, in the opinion of
the Fund's investment adviser, they are considered to be emerging markets. While
the investment adviser considers the above-mentioned countries eligible for
investment, the Fund will not be invested in all such markets at all times.
Furthermore, the Fund may not pursue investment in such countries due to lack of
adequate custody of the Fund's assets, overly burdensome restrictions and
repatriation, lack of an organized and liquid market, or unacceptable political
or other risks.

Emerging markets companies are defined as (i) those for which the principal
securities trading
market is an emerging market country, as described above; (ii) those which are
organized under the laws of, or with a principal office in, an emerging market
country; or (iii) those, wherever organized or traded, who derive (directly or
indirectly through subsidiaries) at least 50% of their total assets,
capitalization, gross revenue or profit from its most current year from goods
produced, services performed, or sales made in such emerging market countries.

ACCEPTABLE INVESTMENTS

COMMON AND PREFERRED STOCK

Stocks represent shares of ownership in a company. Generally, preferred stock
has a specified dividend and ranks after bonds and before common stocks in its
claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate in
company profits on a pro rata basis; profits may be paid out in dividends or
reinvested in the company to help it grow. Increases and decreases in earnings
are usually reflected in a company's stock price, so common stocks generally
have the greatest appreciation and depreciation potential of all corporate
securities. While most preferred stocks pay a dividend, the Fund may purchase
preferred stock where the issuer has omitted, or is in danger of omitting,
payment of its dividend. Such investments would be made primarily for their
capital appreciation potential.

DEPOSITARY RECEIPTS

EDRs, GDRs, GDCs, IDRs, and RDCs are collectively known as "Depositary
Receipts." Depositary Receipts may be available for investment through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the security underlying the receipt and a depositary,
whereas an unsponsored facility may be established by a depositary without
participation by the issuer of the receipt's underlying security. Holders of an
unsponsored Depositary Receipt generally bear all the costs of the unsponsored
facility. The depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through to the holders of the receipts voting
rights with respect to the deposited securities.

DEBT SECURITIES

In pursuit of the Fund's objective of long-term growth of capital, the Fund may
invest up to 35% of its total assets in debt securities. Capital appreciation in
debt securities may arise as a result of favorable changes in the
creditworthiness of issuers, relative interest rate levels, or relative foreign
exchange rates. Any income received from debt securities will be incidental to
the Fund's objective of long-term growth of capital. These debt obligations
consist of U.S. and foreign government securities and corporate debt securities,
including, but not limited to, Samurai and Yankee bonds, Eurobonds and
depositary receipts. The issuers of such debt securities may or may not be
domiciled in emerging countries.

The debt securities in which the Fund may invest may be rated, at the time of
purchase, as low as C by Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service ("Fitch") or by Moody's Investors Service, Inc. ("Moody's"),
or, if unrated, are of comparable quality as determined by the investment
adviser. Such debt securities are commonly known as "junk bonds." The prices of
fixed income securities generally fluctuate inversely to the direction of
interest rates. Please refer to the Appendix in this prospectus for a
description of the ratings.

CONVERTIBLE SECURITIES

INVESTING IN SECURITIES OF
OTHER INVESTMENT COMPANIES

Due to restrictions on direct investment by foreign entities in certain foreign
countries, investments in other investment companies may be the most practical
or only manner in which the Fund can participate in the securities markets of
such countries. The Fund may also invest in other investment companies for the
purpose of investing its short term cash on a temporary basis. The Fund may
invest up to 10% of its total assets in the securities of other investment
companies. To the extent that the Fund invests in securities issued by
other investment companies, the Fund will indirectly bear its proportionate
share of any fees and expenses paid by such companies, in addition to the fees
and expenses payable directly by the Fund.

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 restrictions on resale under
federal securities law. The Fund will limit investment in restricted securities
to 10% of its total assets. Securities that can be traded without restrictions
in non-U.S. securities markets will not be treated as restricted, even if they
cannot be traded in U.S. securities markets without restriction. Restricted
securities may be issued by new and early stage companies which may include a
high degree of business and financial risk that can result in substantial
losses. As a result of the absence of a public trading market for these
securities, they may be less liquid than publicly traded securities. Although
these securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by the Fund,
or less than what may be considered the fair value of such securities. Further,
companies whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements which might be applicable
if their securities were publicly traded. If such securities are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expense of registration. The Fund
will limit investments in illiquid securities, including certain restricted
securities not determined by the Directors to be liquid, over-the counter
options, swap agreements not determined to be liquid, and repurchase agreements
providing for settlement in more than seven days after notice, to 15% of its net
assets.
REPURCHASE AGREEMENTS

WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS

The Fund may dispose of a commitment prior to settlement if the investment
adviser deems it appropriate to do so. In addition, the Fund may

enter into transactions to sell its purchase commitments to third parties at
current market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits or
losses upon the sale of such commitments.

LENDING OF PORTFOLIO SECURITIES

TEMPORARY INVESTMENTS

FORWARD COMMITMENTS
Forward commitments are contracts to purchase securities for a fixed price at a
date beyond customary settlement time. The Fund may enter into these contracts
if liquid securities in amounts sufficient to meet the purchase price are
segregated on the Fund's records at the trade date and maintained until the
transaction has been settled. Risk is involved if the value of the security
declines before settlement. Although the Fund enters into forward commitments
with the intention of acquiring the security, it may dispose of the commitment
prior to settlement and realize short-term profit or loss.

FOREIGN CURRENCY TRANSACTIONS

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 exchanges 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. Further,
the Fund may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations.
Cross-hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to
which such transactions relate and changes in the value of the currency or other
asset or liability that is the subject of the hedge.

FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS

OPTIONS

FUTURES AND OPTIONS ON FUTURES

The Fund may enter into futures contracts involving foreign currency,
securities, and securities indices, or options thereon, for bona fide hedging
purposes. The Fund may also enter into such futures contracts or related options
for purposes other than bona fide hedging if the aggregate amount of initial
margin deposits exclusive of the margin needed for foreign currency hedging, on
the Fund's futures and related options positions would not exceed 5% of the net
liquidation value of the Fund's assets, provided further that in the case of an
option that is in-the-money at the time of the purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. In addition, the Fund may not
sell futures contracts if the value of such futures contracts exceeds the total
market value of the Fund's portfolio securities. Futures contracts and options
thereon sold by the Fund are generally subject to segregation and coverage
requirements established by either the Commodities Futures Trading Commission
("CFTC") or the Securities and Exchange Commission ("SEC"), with the result
that, if the Fund does not hold the instrument underlying the futures contract
or option, the Fund will be required to segregate on an ongoing basis with its
custodian cash, U.S. government securities, or other liquid high grade debt
obligations in an amount at least equal to the Fund's obligations with respect
to such instruments.

ment adviser believes such investment is more efficient, liquid, or
cost-effective than investing directly in the securities underlying the index.

RISKS OF FUTURES AND
OPTIONS TRANSACTIONS

SWAP AGREEMENTS

As one way of managing its exposure to different types of investments, the Fund
may enter into

interest rate swaps, currency swaps, and other types of swap agreements such as
caps, collars, and floors. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of the Fund's investments, its share
price and yield. The Fund may invest up to 35% of its assets in swap agreements
that the adviser determines to be liquid.

Swap agreements are sophisticated instruments that typically involve a small
investment of cash relative to the magnitude of risks assumed. As a result,
swaps can be highly volatile and may have a considerable impact on the Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. The Fund may also suffer losses if it is unable
to terminate outstanding swap agreements to reduce its exposure through
offsetting transactions. When the Fund enters into a swap agreement, assets of
the Fund equal to the value of the swap agreement will be segregated by the
Fund.

DERIVATIVE CONTRACTS
AND SECURITIES

The term "derivative" has traditionally been applied to certain contracts
(including, futures, forward, option and swap contracts) that "derive" their
value from changes in the value of an underlying security, currency, commodity
or index. Certain types of securities that incorporate the performance
characteristics of these contracts are also referred to as "derivatives." Some
securities, such as stock rights, warrants and convertible securities, although
not typically referred to as derivatives, contain options that may affect their
value and performance. Derivative contracts and securities can be used to reduce
or increase the volatility of an investment portfolio's total performance. While
the response of certain derivative contracts and securities to market changes
may differ from traditional investments, such as stock and bonds, derivatives do
not necessarily present greater market risks than traditional investments. The
Fund will only use derivative contracts for the purposes disclosed in the
applicable prospectus sections above. To the extent that the Fund invests in
securities that could be characterized as derivatives, it will only do so in a
manner consistent with its investment objective, policies and limitations.

RISK CHARACTERISTICS OF
FOREIGN SECURITIES

Brokerage commissions, custodial services, and other costs relating to
investment may be more expensive than in the United States. Foreign markets may
have different clearance and settlement procedures such as requiring payment for
securities before delivery. In certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. The inability of
the Fund to make intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities. Inability to dispose
of a portfolio security due to settlement problems could result either in losses
to the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.

CURRENCY RISKS

Because the majority of securities purchased by the Fund are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value; the value of interest earned;
gains and losses realized on the sale of securities; and net investment income
and capital gain, if any, to be distributed to shareholders by the Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of Fund
assets denominated in the currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S. dollar the value of Fund assets
denominated in that currency will decrease. Under the United States Internal
Revenue Code, as amended (the "Code"), the Fund is required to separately
account for the foreign currency component of gains or losses, which will
usually be viewed under the Code as items of ordinary and distributable income
or loss, thus affecting the Fund's distributable income. (See "Federal Income
Tax").