WORLD INVESTMENT SERIES INC, 497, 1997-01-31

WORLD INVESTMENT SERIES INC
497, 1997-01-31

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

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

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

The shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in these shares involves investment risks,
including the possible loss of principal.

This prospectus contains the information you should read and know before you
invest in Class A Shares, Class B Shares and Class C 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, Class C Shares and Class F Shares dated January 31,
1997, with the Securities and Exchange Commission ("SEC"). 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 1-800-341-7400. To
obtain other information or 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 are maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

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

Prospectus dated January 31, 1997

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TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1
Financial Highlights--Class A Shares...........................................4

Financial Highlights--Class B Shares...........................................5

Financial Highlights--Class C Shares...........................................6

General Information............................................................7

Investment Information.........................................................8

Investment Objective.........................................................8

Investment Policies..........................................................8

Risk Factors and Investment Considerations.....................................9

Other Investment Practices..................................................12

Investment Limitations......................................................13

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

Investing in the Fund.........................................................15

How to Purchase Shares........................................................16

Investing in Class A Shares.................................................16

Investing in Class B Shares.................................................18

Investing in Class C Shares.................................................19

Special Purchase Features...................................................20

Exchange Privilege............................................................20

How to Redeem Shares..........................................................22

Special Redemption Features.................................................23

Contingent Deferred Sales Charge............................................23

Elimination of Contingent Deferred

Sales Charge.............................................................24

Account and Share Information.................................................26

Fund Information..............................................................27

Management of the Corporation...............................................27

Distribution of Shares......................................................28

Administration of the Fund..................................................29

Brokerage Transactions........................................................30

Shareholder Information.......................................................30

Voting Rights...............................................................30

Tax Information...............................................................31

Federal Income Tax..........................................................31

State and Local Taxes.......................................................31

Performance Information.......................................................32

Other Classes of Shares.......................................................32

Addresses.....................................................................33

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

FEDERATED WORLD UTILITY 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 average net assets)
Management Fee (after waiver)(2)........................................................... 0.00%
12b-1 Fee.................................................................................. None
Total Other Expenses (after expense reimbursement)......................................... 1.35%
Shareholder Services Fee...................................................... 0.25%
Total Operating Expenses(3)....................................................... 1.35%
</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
year of purchase. (See "Contingent Deferred Sales Charge").

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

(3) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1997. The total
operating expenses were 1.05% for the fiscal year ended November 30, 1996
and would have been 4.16% absent the voluntary waiver of the management fee
and the voluntary reimbursement of certain other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class A Shares" and "Fund
Information." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return, (2) redemption at the end of
each time period, and (3) payment of the maximum sales
charge........................................................ $ 68 $95 $ 125 $208
</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.

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

SUMMARY OF FUND EXPENSES

FEDERATED WORLD UTILITY FUND
<TABLE>
<S> <C> <C>
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
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 average net assets)
Management Fee (after waiver)(2)................................................................... 0.00%
12b-1 Fee.......................................................................................... 0.75%
Total Other Expenses (after expense reimbursement)................................................. 1.35%
Shareholder Services Fee.............................................................. 0.25%
Total Operating Expenses(3)(4)............................................................ 2.10%
</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 total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1997. The total
operating expenses were 1.80% for the fiscal year ended November 30, 1996
and would have been 4.91% absent the voluntary waiver of the management fee
and the voluntary reimbursement of certain other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class B Shares" and "Fund
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 5 years 10 years
- --------------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return, (2) redemption at the end of each time period,
and (3) payment of the maximum sales charge.......................... $ 78 $ 109 $ 136 $223
You would pay the following expenses on the same investment, assuming
no redemption........................................................ $ 21 $ 66 $ 113 $223
</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.

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

SUMMARY OF FUND EXPENSES

FEDERATED WORLD UTILITY FUND
<TABLE>
<S> <C> <C>
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
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 average net assets)
Management Fee (after waiver)(2).............................................................. 0.00%
12b-1 Fee..................................................................................... 0.75%
Total Other Expenses (after expense reimbursement)............................................ 1.35%
Shareholder Services Fee......................................................... 0.25%
Total Operating Expenses(3).......................................................... 2.10%
</TABLE>

(1) The contingent deferred sales charge assessed is 1.00% 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 total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1997. The total
operating expenses were 1.80% for the fiscal year ended November 30, 1996
and would have been 4.91% absent the voluntary waiver of the management fee
and the voluntary reimbursement of certain other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class C Shares" and "Fund
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 5 years 10 years
- ----------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each
time period, and (3) payment of the maximum sales charge......... $ 32 $66 $ 113 $243
You would pay the following expenses on the same investment,
assuming no redemption........................................... $ 21 $66 $ 113 $243
</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.

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

FINANCIAL HIGHLIGHTS--CLASS A SHARES

FEDERATED WORLD UTILITY FUND

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

--------------------------------------------------------------------
------ ------ ---------
Total from investment operations 2.10 1.69 (0.22)
- ---------------------------------------------------------------------- ------ ------ ---------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Distributions from net investment income (0.37) (0.40) (0.17)
- ---------------------------------------------------------------------- ------ ------ ---------
NET ASSET VALUE, END OF PERIOD $ 12.69 $10.96 $ 9.67
- ---------------------------------------------------------------------- ------ ------ ---------
TOTAL RETURN (B) 19.54% 17.94% (3.00)%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.05% 0.25% 0.25%*
- ----------------------------------------------------------------------
Net investment income 3.87% 4.39% 5.10%*
- ----------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.11% 4.78% 4.43%*
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,671 $8,875 $ 4,948
- ----------------------------------------------------------------------
Average commission rate paid $0.0001 -- --
- ----------------------------------------------------------------------
Portfolio turnover 50% 46% 7%
- ----------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 21, 1994 (date of initial
public investment) to November 30, 1994.
For the period from the start of business, March 17, 1994, to April 20,
1994, Class A Shares had no public investment.

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

(c) For the periods ended November 30, 1995 and 1994, the Adviser waived all of
its investment advisory fee, 1.00% and 1.00%, respectively, and reimbursed
other operating expenses, 0.34% and 0.86%, respectively, to comply with
certain state expense limitations. The remainder of the reimbursement was
voluntary. This expense decrease is reflected in both the expense and net
investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated November 30, 1996, which can be obtained free of charge.

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

FINANCIAL HIGHLIGHTS--CLASS B SHARES

FEDERATED WORLD UTILITY FUND

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 17, 1997 on the Fund's
financial statements for the year ended November 30, 1996, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference herein. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995(A)
- ------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.95 $ 10.53
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.35 0.11
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency 1.67 0.41
- ------------------------------------------------------------------------ --------- ---------
Total from investment operations 2.02 0.52
- ------------------------------------------------------------------------ --------- ---------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Distributions from net investment income (0.29) (0.10)
- ------------------------------------------------------------------------ --------- ---------
NET ASSET VALUE, END OF PERIOD $ 12.68 $ 10.95
- ------------------------------------------------------------------------ --------- ---------
TOTAL RETURN (B) 18.79% 5.00%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 1.80% 1.00%*
- ------------------------------------------------------------------------
Net investment income 3.18% 2.99%*
- ------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.11% 4.78%*
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 4,091 $ 1,068
- ------------------------------------------------------------------------
Average commission rate paid $0.0001 --
- ------------------------------------------------------------------------
Portfolio turnover 50% 46%
- ------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from July 27, 1995 (date of initial
public investment) to November 30, 1995.

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

(c) For the period ended November 30, 1995, the Adviser waived all of its
investment advisory fee, 1.00%, and reimbursed other operating expenses,
0.34%, to comply with certain state expense limitations. The remainder of
the reimbursement was voluntary. This expense decrease is reflected in both
the expense and net investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated November 30, 1996, which can be obtained free of charge.

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

FINANCIAL HIGHLIGHTS--CLASS C SHARES

FEDERATED WORLD UTILITY FUND

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 17, 1997 on the Fund's
financial statements for the year ended November 30, 1996, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference herein. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be obtained
from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995(A)
- ------------------------------------------------------------------------ ------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.95 $ 10.53
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.33 0.15
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency 1.68 0.37
- ------------------------------------------------------------------------ --------- ---------
Total from investment operations 2.01 0.52
- ------------------------------------------------------------------------ --------- ---------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Distributions from net investment income (0.29) (0.10)
- ------------------------------------------------------------------------ --------- ---------
NET ASSET VALUE, END OF PERIOD $ 12.67 $ 10.95
- ------------------------------------------------------------------------ --------- ---------
TOTAL RETURN (B) 18.61% 4.92%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 1.80% 1.00%*
- ------------------------------------------------------------------------
Net investment income 3.17% 3.03%*
- ------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.11% 4.77%*
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 1,072 $374
- ------------------------------------------------------------------------
Average commission rate paid $0.0001 --
- ------------------------------------------------------------------------
Portfolio turnover 50% 46%
- ------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from July 27, 1995 (date of initial
public investment) to November 30, 1995.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated November 30, 1996, which can be obtained free of charge.

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

GENERAL INFORMATION

The Corporation was established as a corporation under the laws of the State of
Maryland on January 25, 1994. The Corporation's address is Liberty Center,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Articles of
Incorporation permit the Fund to offer separate series of shares representing
interests in separate portfolios of securities. The shares in any one portfolio
may be offered in separate classes. As of the date of this prospectus, the Board
of Directors ("Directors") has established four classes of shares known as Class
A Shares, Class B Shares, Class C Shares and Class F Shares. This prospectus
relates only to the Class A Shares, Class B Shares and Class C Shares of the
Corporation's portfolio known as Federated World Utility Fund (formerly, World
Utility Fund) (individually and collectively as the context requires, "Shares").

For information on how to purchase the Shares offered by this prospectus, 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 $1500. 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 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."

Class B Shares are sold at net asset value and are redeemed at net asset value.
However, 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."

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

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

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

may be in danger of loss of income and principal due to an issuer's default. To
a greater extent than investment grade bonds, the value of lower-rated bonds
tends to reflect short-term corporate, economic, and market developments, as
well as investor perceptions of the issuer's credit quality. In addition, lower
rated bonds may be more difficult to dispose of or to value than high-rated,
lower-yielding bonds. The Investment Adviser attempts to reduce the risks
described above through diversification of the portfolio and by credit analysis
of each issuer as well as by monitoring broad economic trends and corporate and
legislative developments. In the event the rating on an issue held in the Fund's
portfolio is changed by the ratings services (or, for an unrated issue, in the
determination of the Investment Adviser), such event will be considered by the
Investment Adviser in its evaluation of the overall investment merits of that
security, but will not necessarily result in the automatic sale of the security.
A description of the rating categories is contained in the Appendix to the
Statement of Additional Information.

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

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

RISK FACTORS AND INVESTMENT
CONSIDERATIONS

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

CONSIDERATIONS OF UTILITY SECURITIES

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

provide utility companies with a rate of return sufficient to attract capital
investment necessary for continued operation and necessary growth. Recently,
utility regulators have permitted utilities to diversify outside of their
original geographic regions and their traditional lines of business. While the
Investment Adviser believes that these opportunities will permit certain utility
companies to earn more than their traditional regulated rates of return, other
companies may be forced to defend their core businesses and may be less
profitable. Of course, there can be no assurance that all of the regulatory
policies described in this paragraph will continue in the future.

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

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

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

ELECTRIC

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

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

TELECOMMUNICATIONS

The telephone industry is large and highly concentrated. The greatest portion of
this segment is comprised of companies which distribute telephone services and
provide access to the tele-

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

GAS

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

WATER

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

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

EXCHANGE RATES

Foreign securities are denominated in foreign currencies. Therefore, the value
in U.S. dollars of the Fund's assets and income may be affected by changes in
exchange rates and regulations. Although the Fund values its assets daily in
U.S. dollars, it will not convert its holding of foreign currencies to U.S.
dollars daily. When the Fund converts its holdings to another currency, it may
incur conversion costs. Foreign exchange dealers realize a profit on the
difference between the prices at which they buy and sell currencies.

FOREIGN COMPANIES

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

U.S. GOVERNMENT POLICIES

In the past, U.S. government policies have discouraged or restricted certain
investments abroad by investors such as the Fund. Although the Fund

is unaware of any current restrictions, investors are advised that these
policies could be reinstituted.

OTHER INVESTMENT PRACTICES

FOREIGN CURRENCY TRANSACTIONS

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

FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS

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

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

REPURCHASE AGREEMENTS

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

less than the repurchase price on any sale of such securities.

LENDING OF PORTFOLIO SECURITIES

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

RESTRICTED AND

ILLIQUID SECURITIES

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 a future time. 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.

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.

COVERED CALL OPTIONS

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

INVESTMENT LIMITATIONS

The Fund will not:

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

- - borrow money, issue senior securities, or pledge assets, except that under
certain circumstances the Fund may borrow money and engage in

reverse repurchase transactions in amounts up to one-third of the value of its
total assets, including the amounts borrowed, and pledge up to 15% of the
value its assets taken at cost to secure such borrowings; or

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

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 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, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.

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

INVESTING IN THE FUND

This prospectus 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 qualify for reduced sales charges. See "Reducing or
Eliminating the Sales Charge--Class A Shares." 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 PUBLIC AMOUNT OF PUBLIC
TRANSACTION OFFERING 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 Class A 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.

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 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

As shown in the table on page 16, larger purchases can reduce or eliminate the
sales charge paid. The Fund will combine purchases of Class A 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 or eliminated 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 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 $90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.

To receive the sales charge reduction or elimination, 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

For purposes of qualifying for a sales charge reduction or elimination, a
shareholder has the privilege of combining concurrent purchases of two or more
Class A Shares in funds advised by subsidiaries of Federated Investors
("Federated Funds"), the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $80,000 in one of the Class A
Shares in the Federated Funds with a sales charge, and $20,000 in the Class A
Shares of this Fund, the sales charge would be reduced.

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

LETTER OF INTENT

If a shareholder intends to purchase at least $100,000 of shares in the funds in
the Federated Funds (excluding money market funds) over the next 13 months, the
sales charge may be reduced or eliminated 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 Class A Shares of any fund in
the 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 a right,
within 120 days, to reinvest the redemption proceeds at the next-determined net
asset value without any sales charge. Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his 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 redeemed 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% 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.

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

Class B Shares will automatically convert into Class A Shares on or around the
fifteenth of the month eight full years after the purchase date, except as noted
below, and will no longer be subject to a distribution services fee (see
"Distribution of Shares"). Such conversion will be on the basis of the relative
net asset values per share, without the imposition of any sales charge, fee or
other charge. Class B Shares acquired by exchange from Class B Shares of another
fund in the Federated Funds 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 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

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.

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

(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
to: Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. The check should be made payable to the name of the Fund (designate
class of Shares and account number). 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 or savings
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.

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

EXCHANGE PRIVILEGE

CLASS A SHARES

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

CLASS B SHARES

Class B shareholders may exchange all or some of their Shares for Class B Shares
of other funds in the Federated Funds. (Not all funds in the 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. In determining the applicability of the contingent
deferred sales charge, the required holding period for your new Class B Shares
received through an exchange will include the period for which your original
Class B Shares were held.

CLASS C SHARES

Class C shareholders may exchange all or some of their Shares for Class C Shares
in other funds in the Federated Funds at net asset value without a contingent
deferred sales charge. (Not all funds in the Federated Funds currently offer
Class C Shares. Contact your financial institution regarding the availability of
other Class C Shares in the Federated Funds.) In determining the applicability
of the contingent deferred sales charge, the required holding period for your
new Class C Shares received through an exchange will include the period for
which your original Class C Shares were held. For more information, see
"Contingent Deferred Sales Charge."

Shareholders of Class A Shares who have been designated Liberty Life Members are
exempt from sales charges on future purchases in and exchanges between the Class
A Shares of any funds in the 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.

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.

Further information on the exchange privilege and prospectuses for the Federated
Funds are available by contacting the Fund.

TAX CONSEQUENCES

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending 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, 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.

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

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. Redemptions of Shares held through retirement plans will be
governed by the requirements of the respective plans.

REDEEMING SHARES THROUGH YOUR
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

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.

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, other than retirement accounts subject to required minimum
distributions. A shareholder may apply for participation in this program through
his financial 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 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% 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
Class A Shares at the time of purchase or the net asset value of the redeemed
Class A Shares at the time of redemption.

CLASS B SHARES

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

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 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. 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 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
fewer than six years 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 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

A contingent deferred sales charge will not be charged in connection with
exchanges of like Shares in other Federated Funds.

minimum balance requirements; and (4) qualifying redemptions of Class B Shares
under a Systematic Withdrawal Program. To qualify for elimination of the
contingent deferred sales charge through a Systematic Withdrawal Program, the
redemptions of Class B Shares must be from an account: that is at least 12
months old, has all Fund distributions reinvested in Fund Shares, and has a
value of at least $10,000 when the Systematic Withdrawal program is established.
Qualifying redemptions may not exceed 1.00% monthly of the account value as
periodically determined by the Fund. For more information regarding the
elimination of the contingent deferred sales charge through a Systematic
Withdrawal Program contact your financial intermediary or the Fund. 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 their immediate family members; 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, or any other financial institution, to the
extent that no payments were advanced for purchases made through such entities.
The Fund reserves the right to discontinue or modify the elimination of the
contingent deferred sales charge. Shareholders will be notified of a
discontinuation. 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 the shareholder is entitled to such elimination.

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

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 AND DISTRIBUTIONS

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Distributions of any net realized capital gains will be
made at least once every twelve months. Dividends and distributions are
automatically reinvested in additional Shares 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 quarter's dividend.

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.

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

FUND INFORMATION

MANAGEMENT OF THE CORPORATION

DIRECTORS

The Corporation is managed by the 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 Directors handles the Directors' responsibilities between
meetings of the Directors.

INVESTMENT ADVISER

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

Both the Corporation and the Investment 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
Directors, and could result in severe penalties.

ADVISORY FEES

The Investment Adviser receives an annual investment advisory fee equal to 1.00%
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. The
Investment Adviser may voluntarily choose to waive a portion of its fee or
reimburse the Fund for certain operating expenses. The Investment Adviser can
terminate this voluntary reimbursement of expenses at any time at its sole
discretion.

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. 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 Investment Adviser had not
served as an investment adviser to mutual funds.

work in and through 4,500 financial institutions nationwide.

Henry A. Frantzen has been the Fund's portfolio manager since November 1995. 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 to 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 November 1995. 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 Arnhold and 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.

Michael J. Donnelly has been the Fund's portfolio manager since November 1995.
Mr. Donnelly joined Federated Investors in 1993 as an Investment Analyst and has
been an Assistant Vice President of the Fund's investment adviser since 1995.
Mr. Donnelly served as Assistant Manager at Korea First Bank from 1991 to 1993.
Mr. Donnelly received his Masters in Management with a concentration in
international business and finance from Northwestern University.

DISTRIBUTION OF 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.

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 (CLASS B SHARES AND CLASS C SHARES ONLY) AND SHAREHOLDER
SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), Class B Shares and Class C Shares will pay a
fee to the distributor in an amount computed at an annual rate of .75% 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. For 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 .75% of each class of 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 Distribution Plan.

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 Distribution 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 .25% 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.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS

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 sales services, distribution related support services,
or shareholder services. 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 Adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

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

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

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

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Investment Adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the Investment 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 Investment 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
Investment Adviser makes decisions on portfolio transactions and selects brokers
and dealers subject to review by the Directors.

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

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 portfolio
or class in the Fund have equal voting rights, except that in matters affecting
only a particular portfolio or class, only Shares of that portfolio or class are
entitled to vote. As of December 31, 1996, Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, for the sole benefit of its customers, was the owner of
record of approximately 330,210 shares (47.89%) of the Class F Shares of the
Fund, 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.

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

Directors may be removed by 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 Fund's
outstanding Shares of all series entitled to vote.

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

TAX INFORMATION

FEDERAL INCOME TAX

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

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

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

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

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 including Class F Shares (as described under "Other Classes 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, Class C Shares, and Class F Shares.

From time to time, advertisements for Class A Shares, Class B Shares, Class C
Shares and Class F 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, Class C Shares and Class F Shares to certain
indices.

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

OTHER CLASSES OF SHARES

The Fund also offers another class of shares called Class F Shares. Class F
Shares are sold primarily to customers of financial institutions subject to a
front-end sales charge, a contingent deferred sales charge, a Rule 12b-1 Plan, a
Shareholder Services Plan, and a minimum initial investment of $1,500, unless
the investment is in a retirement account in which the minimum investment is
$50.

Class A Shares, Class B Shares, Class C Shares and Class F Shares are subject to
certain of the same expenses; however, the front-end sales charge for Class F
Shares is lower than that for Class A Shares. Expense differences, however,
between Class A Shares, Class B Shares, Class C Shares and Class F Shares may
affect the performance of each class.

To obtain more information and a prospectus for Class F Shares, investors may
call 1-800-341-7400 or contact their financial institution.

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

<TABLE>
<S> <C> <C>
Federated World Utility Fund
Class A Shares
Class B Shares Federated Investors Tower
Class C Shares 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
- ------------------------------------------------------------------------------------------------
</TABLE>

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

- --------------------------------------------------------------------------------
FEDERATED WORLD
UTILITY FUND
(FORMERLY, WORLD UTILITY 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, 1997

LOGO

Cusip 981487101
Cusip 981487309
Cusip 981487408
G00440-03 (1/97)

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

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

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

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

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

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

Prospectus dated January 31, 1997

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

TABLE OF CONTENTS

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

Financial Highlights--Class F Shares...........................................2

General Information............................................................3

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

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

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

Risk Factors and Investment Considerations.....................................5

Other Investment Practices...................................................7

Investment Limitations.......................................................9

Net Asset Value...............................................................10

Investing in Class F Shares...................................................10

Shares Purchases............................................................10

Minimum Investment Required.................................................11

What Shares Cost............................................................11

Eliminating the Sales Charge................................................12

Systematic Investment Program...............................................13

Exchanging Securities for Fund Shares.......................................13

Exchange Privileges.........................................................13
Certificates and Confirmations..............................................14

Dividends and Distributions.................................................14

Redeeming Class F Shares......................................................14

Through a Financial Institution.............................................14

Redeeming Shares by Telephone...............................................15

Redeeming Shares by Mail....................................................15

Contingent Deferred Sales Charge............................................15

Systematic Withdrawal Program...............................................16

Accounts With Low Balances..................................................16

Fund Information..............................................................17

Management of the Corporation...............................................17

Distribution of Class F Shares................................................19

Administration of the Fund..................................................20

Brokerage Transactions......................................................20

Shareholder Information.......................................................21

Voting Rights...............................................................21

Tax Information...............................................................21

Federal Income Tax..........................................................21

State and Local Taxes.......................................................22

Performance Information.......................................................22

Other Classes of Shares.......................................................23

Addresses.....................................................................24

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

SUMMARY OF FUND EXPENSES

FEDERATED WORLD UTILITY FUND
<TABLE>
<S> <C> <C>
CLASS F SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)........................ 1.00%
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 average net assets)
Management Fee (after waiver)(2)..................................................................... 0.00%
12b-1 Fee (after waiver)(3).......................................................................... 0.00%
Total Other Expenses (after expense reimbursement)................................................... 1.35%
Shareholder Services Fee................................................................ 0.25%
Total Operating Expenses (4)................................................................ 1.35%
</TABLE>

(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within
four years of their purchase date. (See "Contingent Deferred Sales Charge".)

(3) The 12b-1 fee has been reduced to reflect the voluntary waiver of the 12b-1
fee. The distributor can terminate the voluntary waiver at any time at its
sole discretion. The maximum 12b-1 fee is 0.25%.

(4) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1997. The total
operating expenses were 1.07% for the fiscal year ended November 30, 1996
and would have been 4.41% absent the voluntary waiver of the management fee
and a portion of the 12b-1 fee and the voluntary reimbursement of certain
other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class F Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Investing in Class F Shares" and "Fund
Information." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ----------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each
time period, and (3) payment of the maximum sales charge......... $ 34 $63 $83 $171
You would pay the following expenses on the same investment,
assuming no redemption........................................... $ 24 $52 $83 $171
</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.

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

FINANCIAL HIGHLIGHTS--CLASS F SHARES

FEDERATED WORLD UTILITY FUND

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, PERIOD ENDED
----------------- NOVEMBER 30,
1996 1995 1994(A)
- ----------------------------------------------------------------------- ------ ------ -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.96 $ 9.66 $ 10.04
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.43 0.43 0.21
- -----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency 1.67 1.25 (0.43)
- ----------------------------------------------------------------------- ------ ------ ---------
Total from investment operations 2.10 1.68 (0.22)
- ----------------------------------------------------------------------- ------ ------ ---------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Distributions from net investment income (0.36) (0.38) (0.16)
- ----------------------------------------------------------------------- ------ ------ ---------
NET ASSET VALUE, END OF PERIOD $12.70 $10.96 $ 9.66
- ----------------------------------------------------------------------- ------ ------ ---------
TOTAL RETURN (B) 19.55% 17.79% (3.07)%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 1.07% 0.50% 0.50%*
- -----------------------------------------------------------------------
Net investment income 3.87% 4.19% 4.59%*
- -----------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.34% 4.78% 4.43%*
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $8,396 $6,028 $ 4,821
- -----------------------------------------------------------------------
Average commission rate paid $0.0001 -- --
- -----------------------------------------------------------------------
Portfolio turnover 50% 46% 7%
- -----------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 21, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 28, 1994 to April 20, 1994, Fortress Shares had no public
investment.

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

(c) For the periods ended November 30, 1995 and 1994, the Adviser waived all of
its investment advisory fee, 1.00% and 1.00%, respectively, and reimbursed
other operating expenses, 0.34% and 0.86%, respectively, to comply with
certain state expenses limitations. The remainder of the reimbursement was
voluntary. This expense decrease is reflected in both the expense and net
investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated November 30, 1996, which can be obtained free of charge.

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

GENERAL INFORMATION

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

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

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

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

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

The Fund's portfolio will at all times include issuers located in at least three
countries, although the Investment Adviser expects to invest in more than three
countries. It is expected that, under

normal circumstances, the assets of the Fund invested in U.S. securities will be
higher than that invested in securities of any other single country. At times,
the Fund may have more than 65% of its total assets invested in foreign
securities.

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

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

RISK FACTORS AND INVESTMENT CONSIDERATIONS

CONSIDERATIONS OF
UTILITY SECURITIES

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

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

ELECTRIC

TELECOMMUNICATIONS

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

GAS

WATER

The Fund occasionally takes advantage of the unusual opportunities for higher
returns available

from investing in developing countries. These investments, however, carry
considerably more volatility and risk because they are associated with less
mature economies and less stable political systems.

EXCHANGE RATES

FOREIGN COMPANIES

U.S. GOVERNMENT POLICIES

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

OTHER INVESTMENT PRACTICES

FOREIGN CURRENCY
TRANSACTIONS

FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS

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 the trade date and settlement date will vary
between twenty-four hours and thirty days, depending upon local custom.

REPURCHASE AGREEMENTS

LENDING OF PORTFOLIO SECURITIES

RESTRICTED AND

ILLIQUID SECURITIES

WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS

after entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

COVERED CALL OPTIONS

INVESTMENT LIMITATIONS

The Fund will not:

- - borrow money, issue senior securities, or pledge assets, except that under
certain circumstances the Fund may borrow money and engage in reverse
repurchase transactions in amounts up to one-third of the value of its total
assets, including the amounts borrowed, and pledge up to 15% of the value of
its assets taken at cost 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 the Class F Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of
Class F Shares in the liabilities of the Fund and those attributable to the
Class F Shares, and dividing the remainder by the total number of Class F Shares
outstanding. The net asset value for Class F Shares may differ from that of
Class A Shares, Class B Shares, and Class C Shares due to the variance in daily
net income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

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, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.

- -------------------------------------------------------
INVESTING IN CLASS F SHARES

SHARE PURCHASES

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

THROUGH A FINANCIAL INSTITUTION

An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders placed through a financial
institution are considered received when the Fund is notified of the purchase
order. It is the financial institution's responsibility to transmit orders
promptly. Purchase orders through a registered broker/dealer must be received by
the broker before 4:00 P.M. (Eastern time) and must be transmitted by the broker
to the Fund before 5:00 P.M. (Eastern time) in order for Shares to be purchased
at that day's price. Purchase orders through other financial institutions must
be received by the financial institution and transmitted to the Fund before 4:00
P.M. (Eastern time) in order for Shares to be purchased at that day's price.

The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred

to financial institutions which do not maintain investor accounts on a fully
disclosed basis and do not account for share ownership periods (see "Other
Payments to Financial Institutions").

DIRECTLY BY MAIL

An investor may place an order to purchase Shares directly by mail from the
Distributor once an account has been established. To do so, mail a check made
payable to Federated World Utility Fund-Class F Shares to Federated Shareholder
Services Company, P.O. Box 8600, Boston, MA 02266-8600.

Purchases by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company, into federal
funds. This is generally the next business day after the transfer agent's bank
receives the check.

DIRECTLY BY WIRE

To purchase Shares directly from the distributor by Federal Reserve wire once an
account has been established, call the Fund. All information needed will be
taken over the telephone, and the order is considered received when the transfer
agent's bank receives payment by wire. Federal funds should be wired as follows:
Federated Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts 02105; Attention: EDGEWIRE; For Credit to: Federated World
Utility Fund-- Class F Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; ABA Number 011000028. Shares cannot be purchased by
wire on 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.

MINIMUM INVESTMENT REQUIRED

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

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of the
net amount invested). There is no sales charge for purchases of $1 million or
more. In addition, no sales charge is imposed for Shares purchased through bank
trust departments or investment advisers registered under the Investment
Advisers Act of 1940 purchasing on behalf of their clients, or by sales
representatives, Directors, and employees of the Fund, Federated Global Research
Corp., and Federated Securities Corp., or their affiliates, or any investment
dealer who has a sales agreement with Federated Securities Corp., their spouses
and children under age 21, or any trusts or pension or profit-sharing plans for
these persons or retirement plans where the third party administrator has
entered into certain arrangements with Federated Securities Corp., or its
affiliates, to the extent that no payment was advanced for purchases made by
such entities. Unaffiliated institutions through whom Shares are purchased may
charge fees for services provided which may be related to the ownership of Fund
Shares. This prospectus should, therefore, be read together with any agreement
between the customer and the institution with regard to services provided, the
fees charged for these services, and any restrictions and limitations imposed.

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

DEALER CONCESSION

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

ELIMINATING THE SALES CHARGE

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

- - quantity discounts and accumulated purchases;

- - signing a 13-month letter of intent;

- - using the reinvestment privilege; or

- - concurrent purchases

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

There is no sales charge for purchases of $1 million or more. The Fund will
combine purchases 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 is eliminated for purchases of $1 million or
more 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
$900,000 and he purchases $100,000 more at the current public offering price,
there will be no sales charge on the additional purchase.

The Fund will also combine purchases for the purpose of reducing the
contingent deferred sales charge imposed on some Share redemptions. For
example, if a shareholder already owns Shares having a current value at public
offering price of $1 million and purchases an additional $1 million at the
current public offering price, the applicable contingent deferred sales charge
would be reduced to 0.50% of those additional Shares. For more information on
the levels of contingent deferred sales charges and holding periods, see the
section entitled "Contingent Deferred Sales Charge."

To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the
shareholder in writing or by his financial institution at the time the
purchase is made that Shares are already owned or that purchases are being
combined. The Fund will eliminate the sales charge and/or contingent deferred
sales charge after it confirms the purchases.

LETTER OF INTENT

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

The 1.00% held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in

the letter of intent, which must be $1 million or more Shares, is not
purchased. In this event, an appropriate number of escrowed Shares may be
redeemed in order to realize the 1.00% sales charge.

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

REINVESTMENT PRIVILEGE

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

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge elimination, a shareholder has
the privilege of combining concurrent purchases of two or more funds offering
Class F Shares, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $400,000 in Class F Shares of
one of the other funds advised by subsidiaries of Federated Investors
("Federated Funds"), and $600,000 in Shares, the sales charge would be
eliminated.

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

SYSTEMATIC INVESTMENT PROGRAM

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

EXCHANGING SECURITIES FOR

FUND SHARES

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

EXCHANGE PRIVILEGES

Class F Shares may be exchanged for Shares at net asset value without a sales
charge (if previously paid) or a contingent deferred sales charge.

Shareholders using this privilege must exchange Shares having a net asset
value which at least meets the minimum investment required for the fund into
which the exchange is being made. A shareholder may obtain information on the
exchange privilege, and may obtain pro-

spectuses for other Federated Funds by calling Federated Securities Corp. or
their financial institution.

Before making an exchange, a shareholder must receive a prospectus of the fund
for which the exchange is being made.

Please contact your financial institution directly or Federated Securities
Corp. at 1-800-341-7400 for information on and prospectuses for the Federated
Funds into which your Shares may be exchanged free of charge. Each of the
funds may also invest in certain other types of securities as described in
each fund's prospectus.

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 on the application or by contacting the Fund.

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

DIVIDENDS AND DISTRIBUTIONS

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

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

REDEEMING CLASS F SHARES

The Fund redeems Shares 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
through a financial institution or directly from the Fund by written request.

THROUGH A FINANCIAL INSTITUTION

A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value, 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 must be received by the financial
institution and transmitted to the Fund before 4:00 P.M. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders will be promptly notified.

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 wire transferred 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 an Automated Clearing House member 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

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.

CONTINGENT DEFERRED SALES CHARGE

Shareholders redeeming Shares from their Fund accounts within certain time
periods from the purchase dates of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of the lesser of the original
purchase price or the net asset value of the Shares redeemed as follows:
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
- ------------------------- ------------------ --------------
<S> <C> <C>
Up to $1,999,999 less than 4 years 1.00%
$2,000,000 to $4,999,999 less than 2 years 0.50%
$5,000,000 or more less than 1 year 0.25%
</TABLE>

In instances in which Shares have been acquired in exchange for Class F Shares
in other Federated Funds (i) the purchase price is the price of the

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

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

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder; the minimum withdrawal amount
is $100. Depending upon the amount of the withdrawal payments, the amount of
dividends paid and capital gains distributions with respect to Shares, and the
fluctuation of the net asset value of Shares redeemed under this program,
redemptions may reduce, and eventually deplete, the shareholder's investment in
Shares. For this reason, payments under this program should not be considered as
yield or income on the shareholder's investment in Shares. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000 at current offering price, other than retirement accounts subject
to required minimum distributions.

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

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

ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the

balance falls below $500 because of changes in the Fund's net asset value.

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

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

FUND INFORMATION

MANAGEMENT OF THE CORPORATION

DIRECTORS

INVESTMENT ADVISER

ADVISORY FEES

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

ADVISER'S BACKGROUND

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

DISTRIBUTION OF CLASS F SHARES

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

DISTRIBUTION PLAN AND

SHAREHOLDER SERVICES

Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), the Fund may pay to the Distributor an amount,
computed at an annual rate of .25% of the average daily net asset value of
Shares to finance any activity which is principally intended to result in the
sale of shares subject to the Distribution Plan. The Distributor may select
financial institutions such as banks, fiduciaries, custodians for public funds,
investment advisers, and broker/dealers to provide sales support services as
agents for their clients or customers.

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

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to .25% of the average daily net asset value of
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.

OTHER PAYMENTS TO
FINANCIAL INSTITUTIONS

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

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS

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 Adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of the Federated Funds as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- ------------------- --------------------------------
<S> <C>
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750
million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Investment Adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the Investment Adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained elsewhere.
In selecting among firms believed to meet this criteria, the Investment 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
Investment Adviser makes decisions on portfolio transactions and selects brokers
and dealers subject to review by the Directors.

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

SHAREHOLDER INFORMATION

VOTING RIGHTS

Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Corporation have equal voting rights, except that only shares of
that particular Fund or class are entitled to vote in matters affecting that
Fund or class. As of December 31, 1996, Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, for the sole benefit of its customers, was the owner of
record of approximately 330,210 shares (47.89%) of the Class F Shares of the
Fund, 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.

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

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

TAX INFORMATION

FEDERAL INCOME TAX

If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Internal Revenue

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

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION

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

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

The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the offering price per share of Shares 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 Shares and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.

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

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

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

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

OTHER CLASSES OF SHARES

The Fund also offers other classes of shares called Class A Shares, Class B
Shares and Class C Shares which are all sold primarily to customers of financial
institutions subject to certain differences.

Class A Shares are sold subject to a front-end sales charge and a Shareholder
Services Plan. Investments in Class A Shares are subject to a minimum initial
investment of $500, unless the investment is in a retirement account, in which
case the minimum investment is $50.

Class B Shares are sold at net asset value subject to a contingent deferred
sales charge, a Rule 12b-1 Plan and a Shareholder Services Plan. 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 at net asset value subject to a contingent deferred
sales charge, a Rule 12b-1 Plan and a Shareholder Services Plan. Investments in
Class C Shares are subject to a minimum investment of $1,500, unless the
investment is in a retirement account, in which case the minimum investment is
$50.

To obtain more information and a combined prospectus for Class A Shares, Class B
Shares, and Class C Shares, investors may call 1-800-341-7400 or contact their
financial institution.

ADDRESSES

- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated World Utility Fund
Class F 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
- ------------------------------------------------------------------------------------------------

Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>

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

- --------------------------------------------------------------------------------
FEDERATED WORLD
UTILITY FUND
(FORMERLY, WORLD UTILITY FUND)
(A PORTFOLIO OF WORLD INVESTMENT
SERIES, INC.)

CLASS F SHARES

(FORMERLY, FORTRESS SHARES)
PROSPECTUS

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

January 31, 1997

LOGO
Cusip 981487200
4021404A-F(1/97)

FEDERATED WORLD UTILITY FUND
(FORMERLY, WORLD UTILITY FUND)
(A PORTFOLIO OF WORLD INVESTMENT SERIES, INC.)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
CLASS F 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 of
Federated World Utility Fund (formerly, World Utility Fund) (the
"Fund"), dated January 31, 1997, and the prospectus for Class F Shares
(formerly, Fortress Shares) of the Fund, dated January 31, 1997. You
may request a copy of a prospectus or a paper copy of this Statement of
Additional Information, if you have received it electronically, free of
charge by calling 1-800-341-7400.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated January 31, 1997

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 981487101
Cusip 981487200
Cusip 981487309
Cusip 981487408
4021404B (1/97)

GENERAL INFORMATION ABOUT THE FUND 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 1
Lending Portfolio Securities 1
Portfolio Turnover 2
Investment Limitations 2
WORLD INVESTMENT SERIES, INC. MANAGEMENT 4

Fund Ownership 8
Directors Compensation 9
INVESTMENT ADVISORY SERVICES 9

Adviser to the Fund 9
Advisory Fees 10
BROKERAGE TRANSACTIONS 10

OTHER SERVICES 10

Fund Administration 10
Custodian and Portfolio Accountant 10
Transfer Agent 10
Independent Auditors 11
PURCHASING SHARES 11

Distribution Plan (Class B Shares, Class C
Shares and Class F Shares) and Shareholder
Services Agreement 11
Conversion to Federal Funds 11

Purchases by Sales Representatives, Fund
Directors, and Employees 11
Exchanging Securities for Fund Shares 12
DETERMINING NET ASSET VALUE 12

Determining Market Value of Securities 12
Trading in Foreign Securities 12
EXCHANGE PRIVILEGE (CLASS F SHARES ONLY) 13

Reduced Sales Charge 13
Requirements for Exchange 13
Tax Consequences 13
Making an Exchange 13
REDEEMING SHARES 14

Redemption in Kind 14
Elimination of the Contingent Deferred
Sales Charge 14
TAX STATUS 14

The Fund's Tax Status 14
Shareholders' Tax Status 15
TOTAL RETURN 15

YIELD 15

PERFORMANCE COMPARISONS 15

Economic and Market Information 17
ABOUT FEDERATED INVESTORS 17

Mutual Fund Market 18

Institutional Clients 18
Bank Marketing 18
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 18
APPENDIX 19

FINANCIAL STATEMENTS 20

GENERAL INFORMATION ABOUT THE FUND

The Fund is a portfolio in World Investment Series, Inc. (the
`Corporation'') which was established as a corporation under the laws of
the state of Maryland on January 25, 1994. Effective January 31, 1996,
the Fund changed its name to Federated World Utility Fund.
Shares of the Fund are offered in four classes known as Class A Shares,
Class B Shares, Class C Shares and Class F Shares (individually and
collectively referred to as "Shares" as the context may require). This
Statement of Additional Information relates to all classes of Shares of
the Fund.
INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide total return.
TYPES OF INVESTMENTS
The Fund will seek to achieve its investment objective by investing at
least 65% of its total assets in securities issued by domestic and
foreign companies in the utilities industries. The Fund may also
purchase fixed income securities and foreign government securities;
enter into forward commitments, repurchase agreements, and, without
limit, foreign currency transactions; and maintain reserves in foreign
or U.S. money market instruments.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price and yield for the Fund. 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.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject
to repurchase agreements, and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that such
a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of
such securities. The Fund will only enter into repurchase agreements
with banks and other recognized financial institutions, such as
broker/dealers which are deemed by the Fund's adviser to be
creditworthy.
LENDING PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities to broker-dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker-
dealers, banks, or other institutions which the investment adviser has
determined are creditworthy under guidelines established by the
Corporation's Board of Directors (the `Directors'') and will receive
collateral equal to at least 100% of the value of the securities loaned.

The Fund does not intend to lend portfolio securities in the current
fiscal year.
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the borrower. The
Fund may pay reasonable administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on
the cash or equivalent collateral to the borrower or placing broker. The
Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
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.
PORTFOLIO TURNOVER
It is not anticipated that the portfolio trading engaged in by the Fund
will result in its annual rate of portfolio turnover exceeding 100%. The
Fund's investment adviser does not anticipate that portfolio turnover
will result in adverse tax consequences. However, relatively high
portfolio turnover may result in high transaction costs to the Fund. For
the fiscal years ended November 30, 1996 and 1995, the Fund's portfolio
turnover rates were 50% and 46%%, respectively.

INVESTMENT LIMITATIONS
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio
securities up to one-third of the value of its total assets. This
shall not prevent the purchase or holding of corporate bonds,
debentures, notes, certificates of indebtedness or other debt
securities of an issuer, repurchase agreements, or other
transactions which are permitted by the Fund's investment objective
and policies.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its total assets, the Fund will
not purchase securities of any one issuer (other than cash, cash
items, or securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities) if as a result
more than 5% of the value of its total assets would be invested in
the securities of that issuer, and the Fund will not acquire more
than 10% of the outstanding voting securities of any one issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of its total assets in
securities of issuers having their principal business activities in
one industry, except the utilities industry.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets, including the
amount borrowed. The Fund will not borrow money or engage in
reverse repurchase agreements for investment leverage, but rather
as a temporary, extraordinary, or emergency measure to facilitate

management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to
be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings exceeding 5% of the value of its total
assets are outstanding.
PLEDGING SECURITIES
The Fund will not mortgage, pledge, or hypothecate securities,
except when necessary for permissible borrowings. In those cases,
it may pledge assets having a value of 15% of its assets taken at
cost.
BUYING ON MARGIN
The Fund will not purchase any securities on margin but may obtain
such short-term credits as may be necessary for clearance of
purchases and sales of securities.
UNDERWRITING
The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.
INVESTING IN REAL ESTATE
The Fund will not invest in real estate or real estate limited
partnerships, although it may invest in securities secured by real
estate or interests in real estate or issued by companies,
including real estate investment trusts, which invest in real
estate or interests therein.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts except that the Fund may

purchase or sell forward contracts with respect to foreign
securities or currencies.
Except as noted, the above investment limitations cannot be changed
without shareholder approval. The following limitations, however, may be
changed by the Directors without shareholder approval. Except as noted,
shareholders will be notified before any material change in these
limitations becomes effective.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for purpose of
exercising control or management.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own more than 3% of the total outstanding voting
stock of any investment company, invest more than 5% of its total
assets in any investment company, and invest no more than 10% of
its total assets in investment companies in general. The Fund will
purchase securities of closed-end investment companies only in
open-market transactions involving only customary broker's
commissions. However, these limitations are not applicable if the
securities are acquired in a merger, consolidation, reorganization,
or acquisition of assets.
The Fund will limit its investment in other investment companies to
those with a sales charge of less than 1% that have investment
objectives and policies similar to its own. While it is the Fund's
policy to waive its investment advisory fee on assets invested in
securities of open-end investment companies, it should be noted
that investment companies incur certain expenses such as custodian
and transfer agent fees, and, therefore, any investment by the Fund

in shares of another investment company would be subject to such
duplicate expenses.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including securities not determined
by the Directors to be liquid, and repurchase agreements with
maturities longer than seven days after notice.
PUTS AND CALLS
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or
after segregating cash in the amount of any further payment.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital,
surplus, and individual profits in excess of $100,000,000 at the time of
investment to be `cash items''.
The Fund does not intend to borrow money, pledge securities, or invest
in securities of other investment companies in excess of 5% of the value
of its total assets during the coming fiscal year.
The Fund reserves the right to convert to a master/feeder arrangement.
The Fund's portfolio may, notwithstanding any investment policy or
limitation, invest all of its assets in the securities of a single open-

end management investment company with substantially the same investment
objectives, policies and limitations as the Fund.

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
Director and Chairman
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 or Trustee 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

Chairman of the Board, Children's Hospital of Pittsburgh; formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Trustee, University of Pittsburgh; Director or Trustee of the Funds.

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; Partner or Trustee in
private real estate ventures in Southwest Florida; formerly, President,
Naples Property Management, Inc. and Northgate Village Development
Corporation; Director or Trustee of the Funds.

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.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank
Corp.; Director, Ryan Homes, Inc.; Director or Trustee of the Funds.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine, 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 or Trustee of the Funds.

Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Director and President

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.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N
Park Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A.,
Western Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Director
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State
Street Boston Corporation; Director or Trustee of the Funds.

Gregor F. Meyer

Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee 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 or Trustee of the Funds.

of Pittsburgh; Founding Chairman, National Advisory Council for
Environmental Policy and Technology, Federal Emergency Management
Advisory Board and Czech Management Center; Director or Trustee of the
Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director
or Trustee 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 Shareholder Services
Company, and Federated Shareholder Services; Director, Federated

Services Company; President or Executive Vice President of the Funds;
Director or Trustee of some of the Funds. Mr. Donahue is the son of John
F. Donahue, Director and Chairman 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;
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 , Secretary and Treasurer
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; 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: 111 Corcoran Funds; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds;
Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust
Series, Inc. ; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated
Equity Funds; Federated Equity Income Fund, Inc.; Federated Fund for
U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated
Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.

Government Bond Fund; Federated U.S. Government Securities Fund: 1-3
Years; Federated U.S. Government Securities Fund: 2-5 Years; Federated
U.S. Government Securities Fund: 5-10 Years; Federated Utility Fund,
Inc.; First Priority Funds; Fixed Income Securities, Inc.; High Yield
Cash Trust; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid
Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
The Starburst Funds; The Starburst Funds II; The Virtus Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors as a group own less than 1% of the Fund's
outstanding shares .
As of December 31, 1996, no shareholders of record owned 5% or more of
the outstanding Class A Shares of the Fund.
As of December 31, 1996, the following shareholder of record owned 5% or
more of the outstanding Class B Shares of the Fund: Merrill Lynch Pierce
Fenner & Smith, Jacksonville, Florida, for the sole benefit of its
customers, owned approximately 66,464 shares (18.40%).
As of December 31, 1996, the following shareholders of record owned 5%
or more of the outstanding Class C Shares of the Fund: Merrill Lynch
Pierce Fenner & Smith, Jacksonville, Florida, for the sole benefit of
its customers, owned approximately 11,283 shares (12.43%); Donaldson
Lufkin Jenrette Securities Corporation Inc., Jersey City, New Jersey (as

record owner holding Class C Shares for its clients), owned
approximately 20,993 shares (23.12%); and Edward D. Jones & Co., for the
account of J.D. Armstrong, Maryland Heights, Missouri, owned
approximately 4,706 shares (5.18%).
As of December 31, 1996, the following shareholder of record owned 5% or
more of the outstanding Class F Shares of the Fund: Merrill Lynch Pierce
Fenner & Smith, Jacksonville, Florida, for the sole benefit of its
customers, owned approximately 330,210 shares (47.89%).

DIRECTORS COMPENSATION

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

John F. Donahue, $ 0 $ -0- for the Corporation and
Chairman and Director 56 investment companies
Thomas G. Bigley $1,018 $108,725 for the Corporation and
Director 56 investment companies
John T. Conroy, Jr., $1,120 $119,615 for the Corporation and
Director 56 investment companies
William J. Copeland, $1,120 $119,615 for the Corporation and
Director 56 investment companies
James E. Dowd, $1,120 $119,615 for the Corporation and
Director 56 investment companies
Lawrence D. Ellis, M.D., $1,018 $108,725 for the
Corporation and

Director 56 investment companies
Richard B. Fisher, $ 0 $ -0- for the Corporation and
President and Director 6 investment companies
Edward L. Flaherty, Jr., $1,120 $119,615 for the
Corporation and
Director 56 investment companies
Peter E. Madden, $1,018 $108,725 for the Corporation and
Director 56 investment companies
Gregor F. Meyer, $1,018 $108,725 for the Corporation and
Director 56 investment companies
John E. Murray, Jr., $1,018 $108,725 for the Corporation and
Director 56 investment companies Complex
Wesley W. Posvar, $1,018 $108,725 for the Corporation and
Director 56 investment companies
Marjorie P. Smuts, $1,018 $108,725 for the Corporation and
Director 56 investment companies

* Information is furnished for the fiscal year ended November 30, 1996.
# The aggregate compensation provided is for the Corporation, which is
comprised of seven portfolios.
+ The information provided is for the last calendar year end.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
Prior to November 20, 1995, Federated Management served as the Fund's
investment adviser. However, effective November 20, 1995, 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 Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the respective prospectuses. For the fiscal
year ended November 30, 1996, the Adviser earned $214,584, of which
$204,186 was waived. For the period from November 20, 1995 to November
30, 1995, the Adviser earned $3,292, all of which was waived. For the
period from December 1, 1994 to November 20, 1995, Federated Management
earned $116,852, all of which was waived. For the period from March 17,
1994 (start of business) through November 30, 1994, Federated Management
earned $36,237, all of which was waived.
BROKERAGE TRANSACTIONS

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. During the fiscal years ended
November 30, 1996 and 1995 and the period from March 17, 1994, (start of
business) to November 30, 1994, the Fund paid total brokerage
commissions of $48,762, $28,019, and $21,932, and respectively.
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.
OTHER SERVICES

Statement of Additional Information, Federated Services Company and
Federated Administrative Services may hereinafter collectively be
referred to as the `Administrators.'' For the fiscal years ended
November 30, 1996 and 1995, and the period from March 17, 1994, (start
of business) to November 30, 1994, the Administrators earned $215,000,
$175,713 and $38,643, respectively.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company,
Pittsburgh, PA, provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments. 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.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a
fee based on the size, type, and number of accounts and transactions
made by shareholders.

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

Except under certain circumstances described in the respective
prospectuses, Shares are sold at their net asset value (plus a sales
charge on Class A Shares and Class F Shares only) on days the New York

Stock Exchange is open for business. The procedure for purchasing Shares
is explained in the respective prospectuses under "How to Purchase
Shares" and "Investing in Class F Shares."
DISTRIBUTION PLAN (CLASS B SHARES, CLASS C SHARES AND CLASS F SHARES)
AND SHAREHOLDER SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services, to stimulate
distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to, marketing efforts; providing office
space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing
purchase and redemption transactions and automatic investments of client
account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and
addresses.
By adopting the Distribution Plan, (Class B Shares, Class C Shares and
Class F Shares) the Directors expect that the Fund will be able to
achieve a more predictable flow of cash for investment purposes and to
meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's
objectives, and properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing

shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal year ended November 30, 1996, payments in the amounts of
$19,710, $5,453 and $1,336 were made pursuant to the Distribution Plan
for Class B Shares, Class C Shares and Class F Shares, respectively. For
the period from July 27, 1995 (date of initial public investment) to
November 30, 1995, payments in the amounts of $1,047 and $502 were made
pursuant to the Distribution Plan for Class B Shares and Class C Shares,
respectively. For the fiscal year ended November 30, 1995, payment in
the amount of $13,444 was made pursuant to the Distribution Plan for
Class F Shares.
For the fiscal year ended November 30, 1996, payments in the amounts of
$27,064, $6,570, $1,818 and $18,194 were made pursuant to the
Shareholder Services Agreement for Class A Shares, Class B Shares, Class
C Shares and Class F Shares, respectively. For the period from July 27,
1995 (date of initial public investment) to November 30, 1995, payments
in the amounts of $349, and $167 were made pursuant to the Shareholder
Services Agreement for Class B Shares and Class C Shares, respectively.
For the fiscal year ended November 30, 1995, payments in the amounts of
$16,075 and $13,444 were made pursuant to the Shareholder Services
Agreement for Class A Shares and Class F Shares, respectively.
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, FUND DIRECTORS, AND EMPLOYEES
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 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 persons.
These sales are made with the purchaser's written assurance that the
purchase is for investment purposes and that the securities will not be
resold except through redemption by the Fund.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange convertible securities they already own for
Shares, or they may exchange a combination of convertible securities and
cash for Shares. Any securities to be exchanged must meet the investment
objective and policies of the Fund, must have a readily ascertainable
market value, and must not be subject to restrictions on resale.
The Fund will prepare a list of securities which are eligible for
acceptance and furnish this list to brokers upon request. The Fund
reserves the right to reject any security, even though it appears on the
list, and the right to amend the list of acceptable securities at any
time without notice to brokers or investors.
An investment broker acting for an investor should forward the
securities in negotiable form with an authorized letter of transmittal
to Federated Securities Corp. Federated Securities Corp. will determine
that transmittal papers are in good order and forward to the Fund's

custodian, State Street Bank and Trust Company. The Fund will notify the
broker of its acceptance and valuation of the securities within five
business days of their receipt by State Street Bank.
The Fund values such securities in the same manner as the Fund values
its portfolio securities. The basis of the exchange will depend upon the
net asset value of Shares on the day the securities are valued. One
Share will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription, conversion, or other rights attached to the securities
become the property of the Fund, along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for
federal income tax purposes. Depending upon the cost basis of the
securities exchanged for Shares, a gain or loss may be realized by
the investor.
DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the respective
prospectuses.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities where the ex-dividend date may have
passed are recorded as soon as the Fund is informed of the ex-dividend
date.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as
follows:

oaccording to the last reported sale price on a recognized
securities exchange, if available. (If a security is traded on
more than one exchange, the price on the primary market for that
security, as determined by the Adviser, is used.);
oaccording to the mean between the last closing bid and asked
prices, if no sale on the recognized exchange is reported or if
the security is traded over-the-counter;
oat fair value as determined in good faith by the Directors; or
ofor short-term obligations with remaining maturities of 60 days
or less at the time of purchase, at amortized cost, which
approximates value.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may consider:
institutional trading in similar groups of securities; yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from
the closing of the New York Stock Exchange. In computing the net asset
value, the Fund values foreign securities at the latest closing price on
the exchange on which they are traded immediately prior to the closing
of the New York Stock Exchange. Certain foreign currency exchange rates
may also be determined at the latest rate prior to the closing of the
New York Stock Exchange. Foreign securities quoted in foreign currencies
are translated into U.S. dollars at current rates. Occasionally, events
that affect these values and exchange rates may occur between the times
at which they are determined and the closing of the New York Stock
Exchange. If such events materially affect the value of portfolio

securities, these securities may be valued at their fair value as
determined in good faith by the Directors, although the actual
calculation may be done by others.
EXCHANGE PRIVILEGE (CLASS F SHARES ONLY)

This section relates only to Class F Shares of the Fund. For information
regarding the Exchange Privilege for Class A Shares, Class B Shares, and
Class C Shares of the Fund, please see the prospectus for these classes
of Shares.
The Securities and Exchange Commission has issued an order exempting the
Fund from certain provisions of the Investment Company Act of 1940. As a
result, Fund shareholders are allowed to exchange all or some of their
Class F Shares for Class F Shares in other Federated Funds (which are
sold with a sales charge different from that of the Fund or with no
sales charge and which are advised by subsidiaries or affiliates of
Federated Investors) without the assessment of a contingent deferred
sales charge on the exchanged Shares.
The order also allows certain other funds that are not advised by
subsidiaries or affiliates of Federated Investors, which do not have a
sales charge, to exchange their shares for Class F Shares on a basis
other than the current offering price. These exchanges may be made to
the extent that such shares were acquired in a prior exchange, at net
asset value, for shares of a Federated Fund carrying a sales charge.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp.

REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Class F 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.
Upon receipt of proper instructions and required supporting documents,
Class F Shares submitted for exchange are redeemed and the proceeds
invested in Class F Shares of the other fund.
Further information on the exchange privilege and prospectuses for Class
F Funds or certain Federated Funds are available by calling the Fund.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the circumstances, a short-term or
long-term capital gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for certain Federated Funds may be given in
writing or by telephone. Written instructions may require a signature
guarantee.
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 or its agents. If the instructions are given by
a broker, a telephone authorization form completed by the broker
must be on file with the Fund or its agents. Shares may be
exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.

Telephoned exchange instructions may be recorded. They must be
received by the transfer agent before 4:00 p.m. (Eastern time) for
shares to be exchanged that day. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.

REDEEMING SHARES

The Fund redeems Shares at the next computed net asset value after the
Fund receives the redemption request. Shareholder redemptions may be
subject to a contingent deferred sales charge. Redemption procedures are
explained in the respective prospectuses under "How to Redeem Shares" or
"Redeeming Class F Shares." Although the transfer agent does not charge
for telephone redemptions, it reserves the right to charge a fee for the
cost of wire-transferred redemptions of less than $5,000.
Since portfolio securities of the Fund may be traded on foreign
exchanges which trade on Saturdays or on holidays on which the Fund will
not make redemptions, the net asset value each class of Shares of the
Fund may be significantly affected on days when shareholders do not have
an opportunity to redeem their Shares.
Class B Shares redeemed within six years of purchase, Class C Shares and
applicable Class A Shares redeemed within one year of purchase, and
Class F Shares redeemed within four years of purchase may be subject to
a contingent deferred sales charge. The amount of the contingent
deferred sales charge is based upon the amount of the administrative fee
paid at the time of purchase by the distributor to the financial
institutions for services rendered, and the length of time the investor
remains a shareholder in the Fund. Should financial institutions elect

to receive an amount less than the administrative fee that is stated in
the prospectus for servicing a particular shareholder, the contingent
deferred sales charge and/or holding period for that particular
shareholder will be reduced accordingly.
REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole
or in part by a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable SEC rules,
taking such securities at the same value employed in determining net
asset value and selecting the securities in a manner the Directors
determine to be fair and equitable.
The Corporation has elected to be governed by Rule 18f-1 of the
Investment Company Act of 1940 under which the Corporation is obligated
to redeem Shares for any shareholder in cash up to the lesser of
$250,000 or 1% of the Fund's net asset value during any 90-day period.
ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amounts that a shareholder may withdraw under a Systematic
Withdrawal Program that qualify for elimination of the Contingent
Deferred Sales Charge may not exceed 12% annually with reference
initially to the value of the Class B Shares upon establishment of the
Systematic Withdrawal Program and then as calculated at the fiscal year
end. Redemptions on a qualifying Systematic Withdrawal Program can be
made at a rate of 1.00% monthly, 3.00% quarterly, or 6.00% semi-annually
with reference to the applicable account valuation amount. Amounts that
exceed the 12.00% annual limit for redemption, as described, may be
subject to the Contingent Deferred Sales Charge. In determining the
applicability of the Contingent Deferred Sales Charge, the 12 month

holding requirement for your new Class B Shares received through an
exchange will include the period for which your original Class B Shares
were held. However, for purposes of meeting the $10,000 minimum account
value requirement, Class B Share accounts values will not be aggregated.
TAX STATUS

THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
oderive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
oderive less than 30% of its gross income from the sale of
securities held less than three months;
oinvest in securities within certain statutory limits; and
odistribute 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.
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 total returns of the Fund's Class A Shares for the period from April
21, 1994, (date of initial public investment) to November 30, 1996 and
for the fiscal years ended November 30, 1995 and 1996, were 29.24%,
11.49% and 12.94%, respectively. The total returns of the Fund's Class B
Shares for the period from July 27, 1995 (date of initial public
investment) to November 30, 1996 and for the fiscal year ended November
30, 1996 were 19.81% and 13.17%, respectively. The total returns of the
Fund's Class C Shares for the period from July 27, 1995 (date of initial
public investment) to November 30, 1996 and for the fiscal year ended
November 30, 1996 were 24.45% and 17.58%, respectively. The total
returns of the Fund's Class F Shares for the period from April 22, 1994
(date of initial public investment) to November 30, 1996 and for the
fiscal years ended November 30, 1995 and 1996, were 34.09%, 15.52% and
17.33%, respectively.
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 offering
price 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 on
Class A Shares or Class F Shares, adjusted over the period by any

additional Shares, assuming the quarterly 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 offering price of Shares redeemed.
Occasionally, total return which does not reflect the effect of the
sales charge may be quoted in advertising.
YIELD

For the period ended November 30, 1996, the thirty-day yields for Class
A Shares, Class B Shares, Class C Shares, and Class F Shares were 2.42%,
1.82%, 1.82%, and 2.53%, respectively.
The yield for each class of Shares of the Fund is determined by dividing
the net investment income per share (as defined by the SEC) earned by
the class of Shares over a thirty-day period by the maximum offering
price per share of the respective class on the last day of the period.
This value is then annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is
assumed to be generated each month over 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 SEC 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 a class of Shares, the performance will be reduced for those
shareholders paying those fees.
PERFORMANCE COMPARISONS

The performance of each class of Shares depends upon such variables as:

oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is invested;
ochanges in interest rates and market value of portfolio
securities;
ochanges in the Fund's or a class of Shares' expenses; and
ovarious other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and net asset value per Share fluctuate daily. Both net
earnings and net asset value per Share are factors in the computation of
yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance
investors should consider all relevant factors such as the composition
of any index used, prevailing market conditions, portfolio 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:
oLIPPER ANALYTICAL SERVICES, INC. --ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time.
oEUROPE, AUSTRALIA, AND FAR EAST (EAFE) is a market capitalization
weighted foreign securities index, which is widely used to
measure the performance of European, Australian, New Zealand and
Far Eastern stock markets. The index covers approximately 1,020
companies drawn from 18 countries in the above regions. The index

values its securities daily in both U.S. dollars and local
currency and calculates total returns monthly. EAFE U.S. dollar
total return is a net dividend figure less Luxembourg withholding
tax. The EAFE is monitored by Capital International, S.A.,
Geneva, Switzerland.
oSTANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be used to compare to
the total returns of funds whose portfolios are invested
primarily in common stocks. In addition, the Standard & Poor's
index assumes reinvestments of all dividends paid by stocks
listed on its index. Taxes due on any of these distributions are
not included, nor are brokerage or other fees calculated in
Standard & Poor's figures.
oMORNINGSTAR, 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.
oDOW JONES COMPOSITE AVERAGE or its component averages--an
unmanaged index composed of 30 blue-chip industrial corporation
stocks (Dow Jones Industrial Average), 15 utilities company
stocks (Dow Jones Utilities Average), and 20 transportation
company stocks. Comparisons of performance assume reinvestment of
dividends.
oDOW JONES WORLD INDUSTRY INDEX or its component indices,
including, among others, the utility sector.

oSTANDARD & POOR'S 500 STOCK INDEX or its component indices--an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks, and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
oTHE NEW YORK STOCK EXCHANGE composite or component indices--
unmanaged indices of all industrial, utilities, transportation,
and finance stocks listed on the New York Stock Exchange.
oFINANCIAL TIMES ACTUARIES INDICES--including the FTA-World Index
(and components thereof), which are based on stocks in major
world equity markets.
oLIPPER-MUTUAL FUND PERFORMANCE ANALYSIS AND LIPPER-FIXED INCOME
FUND PERFORMANCE ANALYSIS--measure of total return and average
current yield for the mutual fund industry. Rank individual
mutual fund performance over specified time periods, assuming
reinvestment of all distributions, exclusive of any applicable
sales charges.
oVALUE LINE MUTUAL FUND SURVEY, published by Value Line
Publishing, Inc.--analyzes price, yield, risk, and total return
for equity and fixed income mutual funds. The highest rating is
one, and ratings are effective for two weeks.
oMUTUAL FUND SOURCE BOOK, published by Morningstar, Inc.--analyzes
price, yield, risk, and total return for equity and fixed income
funds.
oCDA MUTUAL FUND REPORT, published by CDA Investment Technologies,
Inc.--analyzes price, current yield, risk, total return, and
average rate of return (average annual compounded growth rate)
over specified time periods for the mutual fund industry.

oVALUE LINE INDEX--an unmanaged index which follows the stocks of
approximately 1,700 companies.
oWILSHIRE 5000 EQUITY INDEX--represents the return on the market
value of all common equity securities for which daily pricing is
available. Comparisons of performance assume reinvestment of
dividends.
oHISTORICAL DATA supplied by the research departments of First
Boston Corporation, the J. P. Morgan companies, Salomon Brothers,
Merrill Lynch, Pierce, Fenner & Smith, Smith Barney Shearson and
Bloomberg L.P.
oFINANCIAL 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.
oMORGAN 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.
oCONSUMER PRICE INDEX (OR COST OF LIVING INDEX), published by the
U.S. Bureau of Labor Statistics--a statistical measure of change,
over time, in the price of goods and services in major
expenditure groups.
oSTRATEGIC INSIGHT MUTUAL FUND RESEARCH AND CONSULTING, ranks
funds in various fund categories by making comparative
calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income

dividends and takes into account any change in net asset value
over a specific period of time.
Advertisements and sales literature for all four classes of Shares may
quote total returns which are calculated on non-standardized base
periods. These total returns also represent the historic change in the
value of an investment in either class of Shares based on quarterly
reinvestment of dividends over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise the
performance of a 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.
Advertisements may quote performance information which does not reflect
the effect of various sales charges on Class A Shares, Class B Shares,
Class C Shares, and Class F Shares.
Advertising and other promotional literature may include charts, graphs
and other illustrations using the Fund's returns, or returns in general,
that demonstrate basic investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment. In
addition, the Fund can compare its performance, or performance for the
types of securities in which it invests, to a variety of other
investments, such as bank savings accounts, certificates of deposit, and
Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and

analysis on how such developments could affect the Fund. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including the growth of the
industry, from sources such as the Investment Company Institute.
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.
These traders handle trillions of dollars in annual trading volume.
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' global
portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
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.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust
divisions of the top 100 bank holding companies use Federated funds in
their clients' portfolios. The marketing effort to trust clients is
headed by 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--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country --supported by more wholesalers than
any other mutual fund distributor. Federated's service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by James F. Getz, President, Federated Securities Corp.

*source: Investment Company Institute

APPENDIX

Standard & Poor's Ratings Group (`S&P'') Corporate Bond Rating
Definitions
AAA--Debt rated "AAA" has the highest rating. Capacity to pay interest
and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effect
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB--Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "BBB-" rating.

B--Debt rated "B" has 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 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.
Moody's Investors Service, Inc., Corporate Bond Rating Definitions
AAA--Bonds which are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater

amplitude or other elements which make the long term risks appear
somewhat larger than in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future.
BAA--Bonds which are rated "Baa" are considered as medium grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
BA--Bonds which are "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
CAA--Bonds which are rated "Caa" are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.

Standard & Poor's Ratings Group Commercial Paper Rating Definitions
A-1--This highest category 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.
Moody's 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:
oLeading market positions in well established industries.
oHigh rates of returns on funds employed.
oConservative capitalization structure with moderate reliance on
debt and ample asset protection.
oBroad margins in earning coverage of fixed financial charges and
high internal cash generation.
oWell-established access to a range of financial markets and
assured sources of alternate liquidity.
FINANCIAL STATEMENTS

The financial statements for the Fund for the fiscal year ended November
30, 1996 are incorporated herein by reference to the Annual Report to
shareholders of the Fund dated November 30, 1996.

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

- --------------------------------------------------------------------------------
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, 1997, with the
Securities and Exchange Commission ("SEC"). 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 1-800-341-7400. 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 are
maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

Prospectus dated January 31, 1997

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

TABLE OF CONTENTS

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

Financial Highlights--Class A Shares...........................................2

General Information............................................................3

Investment Information.........................................................4

Investment Objective.........................................................4

Investment Policies..........................................................4

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

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

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

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

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 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 average net assets)
Management Fee (after waiver)(2).............................................................. 0.00%
12b-1 Fee(3).................................................................................. None
Total Other Expenses (after expense reimbursement)............................................ 1.85%
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".

(3) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1997. 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 total operating expenses would have been 8.87% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.

redemptions of less than $5,000 may be subject to additional fees.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ----------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of
each time period, and (3) payment of the maximum sales
charge......................................................... $ 73 $ 110 $ 150 $260
</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.

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

FINANCIAL HIGHLIGHTS--CLASS A SHARES

FEDERATED ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
- ------------------------------------------------------------------------------ -------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.00
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.25
- ------------------------------------------------------------------------------ ---------
Total from investment operations 0.25
- ------------------------------------------------------------------------------ ---------
NET ASSET VALUE, END OF PERIOD $ 10.25
- ------------------------------------------------------------------------------ ---------
TOTAL RETURN (B) 2.50%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 1.85%*
- ------------------------------------------------------------------------------
Net investment income --
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 7.02%*

- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 4,593
- ------------------------------------------------------------------------------
Average commission rate paid $0.0039
- ------------------------------------------------------------------------------
Portfolio turnover 99%
- ------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1996, which can be obtained free of charge.

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

GENERAL INFORMATION

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."

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

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

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

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

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.

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

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
investment 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.

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 commit-

ment 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

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.

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.

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

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.

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.

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 ex-

tent 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.

RISK CHARACTERISTICS OF
FOREIGN SECURITIES

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.

The economies of foreign countries may differ from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, currency
depreciation, capital reinvestment, resource self-sufficiency, and balance of
payments position. Further, the economies of developing countries generally are
heavily dependent on international trade and, accordingly, have been, and may
continue to be, adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. These economies
also have been, and may continue to be, adversely affected

by economic conditions in the countries with which they trade.

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.

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 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.

Debt obligations that are not determined to be investment grade are high-yield,
high-risk bonds, typically subject to greater market fluctuations and greater
risk of loss of income and principal due to an issuer's default. To a greater
extent than investment grade bonds, lower-rated bonds tend to reflect short-term
corporate, economic, and market developments, as well as investor perceptions of
the issuer's credit quality. In addition, lower-rated bonds may be more
difficult to dispose of or to value than higher-rated, lower-yielding bonds.

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.

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

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

shareholders of a particular class are entitled.

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.

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

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

For sales of Shares, a dealer will normally receive up to 90% of the applicable
sales charge. Any portion of the sales charge which is not paid to a dealer will
be retained by the distributor. However, the distributor may offer to pay
dealers up to 100% of the sales charge retained by it. Such 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.

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.

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% 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

PURCHASING SHARES BY WIRE

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.

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

EXCHANGE PRIVILEGE

Class A shareholders may exchange all or some of their Shares for Class A Shares
of other Federated Funds 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.

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

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

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.

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

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

REDEEMING SHARES BY MAIL

SPECIAL REDEMPTION FEATURES

SYSTEMATIC WITHDRAWAL PROGRAM

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, other than retirement accounts subject to required minimum
distributions. 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

may be charged a contingent deferred sales charge of .50% 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 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

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.

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

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

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.

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

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.

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.

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 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 CLASS A SHARES

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 .25% 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 Distribution 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 .25% of the average daily net asset value of
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, an amount equal to .50% 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 Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate

the Fund. Federated Services Company 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% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>

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.

At present, the only expenses which are allocated specifically to Class A Shares
as a class 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 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.

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

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 of December 31, 1996, Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, for the sole benefit of its customers, was the owner of
record of approximately 23,481 shares (53.63%) of the Class C Shares of the
Fund, 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.

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.

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

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.

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.

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

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.

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

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
.75% and a Shareholder Services fee of up to .25% 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 .75%, in addition to a Shareholder Services fee of up to
.25% 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 1-800-341-7400 or contact their financial
institution.

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

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

known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in AAA securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in AAA
securities.

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.

AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

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

BBB--Bonds considered to be investment grade and of satisfactory credit quality.

The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

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

B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

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

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

C--Bonds are 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, 1997

LOGO

Cusip 981487507
G01470-01-A (1/97)

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

- --------------------------------------------------------------------------------
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.

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,
1997, with the Securities and Exchange Commission ("SEC"). 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 1-800-341-7400. 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 are maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

Prospectus dated January 31, 1997

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

TABLE OF CONTENTS

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

Financial Highlights--Class A Shares...........................................4

Financial Highlights--Class B Shares...........................................5

Financial Highlights--Class C Shares...........................................6

Synopsis.......................................................................7

Investment Information.........................................................8

Investment Objective.........................................................8

Investment Policies..........................................................8

Investment Limitations......................................................18

Net Asset Value...............................................................19

Investing in the Fund.........................................................19

How to Purchase Shares........................................................20

Investing in Class A Shares.................................................21

Investing in Class B Shares.................................................23

Investing in Class C Shares.................................................23

Special Purchase Features...................................................24

Exchange Privilege............................................................25

How to Redeem Shares..........................................................26

Special Redemption Features.................................................27

Contingent Deferred Sales Charge............................................28

Elimination of Contingent Deferred
Sales Charge.............................................................29
Account and Share Information.................................................30

Corporation Information.......................................................31

Management of the Corporation...............................................31

Distribution of Shares......................................................32

Administration of the Fund..................................................34

Expenses of the Fund and
Class A Shares, Class B Shares,
and Class C Shares.......................................................34

Brokerage Transactions......................................................35

Shareholder Information.......................................................35

Voting Rights...............................................................35

Tax Information...............................................................36

Federal Income Tax..........................................................36

State and Local Taxes.......................................................36

Performance Information.......................................................37

Appendix......................................................................38

Addresses.....................................................................41

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

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 average net assets)
Management Fee (after waiver)(2)................................................................... 0.00%
12b-1 Fee(3)....................................................................................... 0.00%
Total Other Expenses (after expense reimbursement)................................................. 1.85%
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."

(4) The total operating expenses would have been 8.87% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Corporation Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
------- ------- ------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each
time period, and (3) payment of the maximum sales charge......... $73 $ 110 $ 150 $ 260
</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.

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

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 average net assets)
Management Fee (after waiver)(2).................................................................. 0.00%
12b-1 Fee......................................................................................... 0.75%
Total Other Expenses (after expense reimbursement)................................................ 1.85%
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 total operating expenses would have been 9.62% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "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 5 years 10 years
------- ------- ------- ---------
<S> <C> <C> <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 $ 161 $ 274
You would pay the following expenses on the same investment,
assuming no redemption........................................... $26 $ 81 $ 138 $ 274
</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.

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

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 average net assets)
Management Fee (after waiver)(2).................................................................. 0.00%
12b-1 Fee......................................................................................... 0.75%
Total Other Expenses (after expense reimbursement)................................................ 1.85%
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 total operating expenses would have been 9.62% absent the voluntary
waiver of the management fee and the voluntary reimbursement of certain
other operating expenses.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class C Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "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 5 years 10 years
------- ------- ------- ---------
<S> <C> <C> <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 $ 138 $ 293
You would pay the following expenses on the same investment,
assuming no redemption........................................... $26 $81 $ 138 $ 293
</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.

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

FINANCIAL HIGHLIGHTS--CLASS A SHARES

FEDERATED ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report, dated January 17, 1997, on the Fund's
financial statements for the period ended November 30, 1996, and on the
following table for the period presented, is included in the Annual Report,
which is incorporated by reference herein. This table should be read in
conjunction with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
- -------------------------------------------------------------------------- -------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.00
- --------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.25
- -------------------------------------------------------------------------- ---------
Total from investment operations 0.25
- -------------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.25
- -------------------------------------------------------------------------- ---------
TOTAL RETURN (B) 2.50%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 1.85%*
- --------------------------------------------------------------------------
Net investment income --
- --------------------------------------------------------------------------
Expense waiver/reimbursement (c) 7.02%*
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 4,593
- --------------------------------------------------------------------------
Average commission rate paid $0.0039
- --------------------------------------------------------------------------
Portfolio turnover 99%
- --------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1996, which can be obtained free of charge.

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

FINANCIAL HIGHLIGHTS--CLASS B SHARES

FEDERATED ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report, dated January 17, 1997, on the Fund's
financial statements for the period ended November 30, 1996, and on the
following table for the period presented, is included in the Annual Report,
which is incorporated by reference herein. This table should be read in
conjunction with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
- -------------------------------------------------------------------------- -------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net operating loss (0.03)
- --------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.22
- -------------------------------------------------------------------------- ---------
Total from investment operations 0.19
- -------------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.19
- -------------------------------------------------------------------------- ---------
TOTAL RETURN (B) 1.90%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 2.60%*
- --------------------------------------------------------------------------
Net operating loss (0.86)%*
- --------------------------------------------------------------------------
Expense waiver/reimbursement (c) 7.02%*
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 2,273
- --------------------------------------------------------------------------
Average commission rate paid $0.0039
- --------------------------------------------------------------------------
Portfolio turnover 99%
- --------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1996, which can be obtained free of charge.

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

FINANCIAL HIGHLIGHTS--CLASS C SHARES

FEDERATED ASIA PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report, dated January 17, 1997, on the Fund's
financial statements for the period ended November 30, 1996, and on the
following table for the period presented, is included in the Annual Report,
which is incorporated by reference herein. This table should be read in
conjunction with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
- -------------------------------------------------------------------------- -------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net operating loss (0.05)
- --------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency 0.25
- -------------------------------------------------------------------------- ---------
Total from investment operations 0.20
- -------------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $ 10.20
- -------------------------------------------------------------------------- ---------
TOTAL RETURN (B) 2.00%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 2.60%*
- --------------------------------------------------------------------------
Net operating loss (0.90)%*
- --------------------------------------------------------------------------
Expense waiver/reimbursement (c) 7.02%*
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $397
- --------------------------------------------------------------------------
Average commission rate paid $0.0039
- --------------------------------------------------------------------------
Portfolio turnover 99%
- --------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 28, 1996 (date of initial
public offering) to November 30, 1996.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1996, which can be obtained free of charge.

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

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.

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."

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

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

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.

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

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. 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 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

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 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.

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.

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

FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACTS

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 Adviser
will consider the likelihood of changes in currency values when making
investment decisions, the 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

options to seek to generate income or lock in gains.

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

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 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.

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

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

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

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.