WORLD INVESTMENT SERIES INC, 497, 1998-01-30

WORLD INVESTMENT SERIES INC
497, 1998-01-30

Previous: WORLD INVESTMENT SERIES INC, 497, 1998-01-30

Next: CIBER INC, PRER14A, 1998-01-30

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,
1998, 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, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary of Fund Expenses............................... 1
Financial Highlights -- Class A Shares................. 2
Financial Highlights -- Class B Shares................. 3
Financial Highlights -- Class C Shares................. 4
General Information.................................... 5

Calling the Fund...................................... 5

Investment Information................................. 5
Investment Objective.................................. 5
Investment Policies................................... 5
Convertible Securities................................ 6
Risk Factors and Investment Considerations............ 6

U.S. Government Policies.............................. 8

Other Investment Practices............................ 8
Investment Limitations................................ 10
Net Asset Value........................................ 10
Investing in the Fund.................................. 11
Purchasing Shares...................................... 11

Purchasing Shares Through a Financial Intermediary.... 11

Purchasing Shares by Wire............................. 12
Purchasing Shares by Check............................ 12
Systematic Investment Program......................... 12
Retirement Plans...................................... 12
Class A Shares........................................ 12
Class B Shares........................................ 12
Class C Shares........................................ 13
Redeeming and Exchanging Shares........................ 13
Redeeming or Exchanging Shares Through a
Financial Intermediary................................ 13
Redeeming or Exchanging Shares by Telephone........... 13
Redeeming or Exchanging Shares by Mail................ 13
Requirements for Redemption........................... 14
Requirements for Exchange............................. 14
Systematic Withdrawal Program......................... 14
Contingent Deferred Sales Charge...................... 14
Account and Share Information.......................... 15
Confirmations and Account Statements.................. 15
Dividends and Distributions........................... 15
Accounts with Low Balances............................ 15

Corporation Information................................ 15

Management of the Corporation......................... 15
Distribution of Shares................................ 16
Distribution Plan (Class B Shares and Class C Shares

only) and Shareholder Services........................ 16
Administration of the Fund............................ 17

Brokerage Transactions................................ 17
Shareholder Information................................ 17
Tax Information........................................ 18
Federal Income Tax..................................... 18
State and Local Taxes................................. 18
Performance Information................................ 18
Other Classes of Shares................................ 19
</TABLE>

SUMMARY OF FUND EXPENSES

Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)... 5.50% None None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price)............................................................... None None None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)(1)............................... None 5.50% 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable).............. None None None
Exchange Fee.................................................................... None None None
</TABLE>
Annual Operating Expenses
(As a percentage of average net assets)
<TABLE>
<S> <C> <C> <C>
Management Fee (after waiver)(2)..................... 00.0% 00.0% 00.0%
12b-1 Fee............................................ None 0.75% 0.75%
Total Other Expenses (after expense reimbursement)... 1.49% 1.49% 1.49%
Shareholder Services Fee........................... 0.25% 0.25% 0.25%
Total Operating Expenses(3).......................... 1.49% 2.24%(4) 2.24%
</TABLE>
(1) For shareholders of Class B Shares, the contingent deferred sales charge is
5.50% in the first year declining to 1.00% in the sixth year and 0.00%
thereafter. For shareholders of Class C Shares, 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. For a more complete description, 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, 1998. The total Class A
Shares, Class B Shares and Class C Shares operating expenses were 1.40%,
2.15% and 2.15% respectively, for the fiscal year ended November 30, 1997
and would have been 2.89%, 3.64%, and 3.64% respectively, absent the
voluntary waiver described in note 2 and the voluntary reimbursement of
certain other operating expenses.

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

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Purchasing Shares" and "Corporation Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.

Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.

<TABLE>
<CAPTION>
Example Class A Class B Class C
<S> <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.
1 Year $ 69 $ 79 $ 33
3 Years $100 $113 $ 70
5 Years $132 $143 $120
10 Years $223 $238 $257
You would pay the following expenses on the same investment, assuming no redemption.
1 Year $ 69 $ 23 $ 23
3 Years $100 $ 70 $ 70
5 Years $132 $120 $120
10 Years $223 $238 $257
</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

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. 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,
1997 1996 1995 1994(a)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.69 $ 10.96 $ 9.67 $ 10.06
Income from investment operations
Net investment income 0.28 0.43 0.42 0.24
Net realized and unrealized gain (loss) on investments
and foreign currency 2.00 1.67 1.27 (0.46)
Total from investment operations 2.28 2.10 1.69 (0.22)
Less distributions
Distributions from net investment income (0.38) (0.37) (0.40) (0.17)
Distributions from net realized gain on investments and
foreign currency transactions (0.43) -- -- --
Total distributions (0.81) (0.37) (0.40) (0.17)
Net asset value, end of period $ 14.16 $ 12.69 $10.96 $ 9.67
Total return(b) 19.08% 19.54% 17.94% (3.00%)
Ratios to average net assets
Expenses 1.40% 1.05% 0.25% 0.25%*
Net investment income 2.16% 3.87% 4.39% 5.10%*
Expense waiver/reimbursement(c) 1.49% 3.11% 4.78% 4.43%*
Supplemental data
Net assets, end of period (000 omitted) $20,394 $12,671 $8,875 $ 4,948
Average commission rate paid(d) $0.0004 $ 0.000 -- --
Portfolio turnover 52% 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 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 expenses and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1997, which can be obtained free of charge.

FINANCIAL HIGHLIGHTS--CLASS B SHARES

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Year Ended Period Ended
November 30, November 30,
1997 1996 1995(a)
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.68 $ 10.95 $ 10.53
Income from investment operations
Net investment income 0.21 0.35 0.11
Net realized and unrealized gain on investments and foreign
currency 1.95 1.67 0.41
Total from investment operations 2.16 2.02 0.52
Less distributions
Distributions from net investment income (0.29) (0.29) (0.10)
Distributions from net realized gain on investments and
foreign currency transactions (0.43) -- --
Total distributions (0.72) (0.29) (0.10)
Net asset value, end of period $ 14.12 $ 12.68 $ 10.95
Total return(b) 18.04% 18.79% 5.00%
Ratios to average net assets
Expenses 2.15% 1.80% 1.00%*
Net investment income 1.36% 3.18% 2.99%*
Expense waiver/reimbursement(c) 1.49% 3.11% 4.78%*
Supplemental data
Net assets, end of period (000 omitted) $15,177 $ 4,091 $ 1,068
Average commission rate paid(d) $0.0004 $0.0001 --
Portfolio turnover 52% 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1997, which can be obtained free of charge.

FINANCIAL HIGHLIGHTS--CLASS C SHARES

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Year Ended Period Ended
November 30, November 30,
1997 1996 1995(a)
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.67 $ 10.95 $ 10.53
Income from investment operations
Net investment income 0.19 0.33 0.15
Net realized and unrealized gain on investments and foreign
currency 2.00 1.68 0.37
Total from investment operations 2.19 2.01 0.52
Less distributions
Distributions from net investment income (0.29) (0.29) (0.10)
Distributions from net realized gain on investments and
foreign currency transactions (0.43) -- --
Total distributions (0.72) (0.29) (0.10)
Net asset value, end of period $ 14.14 $ 12.67 $ 10.95
Total return(b) 18.24% 18.61% 4.92%
Ratios to average net assets
Expenses 2.15% 1.80% 1.00%*
Net investment income 1.39% 3.17% 3.03%*
Expense waiver/reimbursement(c) 1.49% 3.11% 4.77%*
Supplemental data
Net assets, end of period (000 omitted) $ 1,923 $ 1,072 $ 374
Average commission rate paid(d) 0.0004 0.0001 --
Portfolio turnover 52% 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. The expense decrease is reflected in both
the expense and net investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated November 30, 1997, which can be obtained free of charge.

GENERAL INFORMATION

The Corporation was incorporated under the laws of the State of Maryland on
January 25, 1994. 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. Class A Shares, Class B Shares, and Class C Shares
of the Fund ("Shares") 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.

The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

Calling the Fund Call the Fund at 1-800-341-7400.

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 "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 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, convertible 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.

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 Services ("S&P") or Baa or
better by Moody's Investors Service, Inc., ("Moody's") or (ii) determined by the
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 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 determined by the Adviser to be of comparable
quality. Securities rated BB, B, and CCC by S&P or Ba, B, and Caa by Moody's
either have speculative characteristics or are predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligations. Debt obligations that are not determined to be
investment grade are high-yield, high-risk bonds, typically subject to greater
market fluctuations, and securities in the lowest rating category may be in
danger of loss of income and principal due to an issuer's default. To a greater
extent than investment grade bonds, the value of lower-rated bonds tends to
reflect short-term corporate, economic, and market developments, as well as
investor perceptions of the issuer's credit quality. In addition, lower rated
bonds may be more difficult to dispose of or to value than high-rated,
lower-yielding bonds. The 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 Adviser), such event will be considered by the 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.

Convertible Securities

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as DECS--
(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS--(Liquid Yield Option Notes, which are
corporate bonds that are purchased at prices below par with no coupons and are
convertible into stock), PERCS--(Preferred Equity Redemption Cumulative Stock
(an equity issue that pays a high cash dividend, has a cap price and mandatory
conversion to common stock at maturity), and PRIDES--(Preferred Redeemable
Increased Dividend Securities (which are essentially the same as DECS; the
difference is little more than who initially underwrites the issue).

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by
an NRSRO or in the Fund holding such securities where they have acquired a
rating below investment grade after the Fund has purchased it.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

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.

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
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 Adviser believes
that it is likely that some foreign governments will seek to "privatize" their
utility companies, (i.e., transfer ownership to private investors).

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

Electric

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

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

Telecommunications

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

Gas

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

Risk Considerations in Developing Countries

Securities prices in developing countries can be significantly more volatile
than in developed countries, reflecting the greater uncertainties of investing
in lesser developed markets and economies. In particular, developing countries
may have relatively unstable governments, and may present the risk of
nationalization of businesses, expropriation, confiscatory taxation or, in
certain instances, reversion to closed market, centrally planned economies. Such
countries may also have restrictions on foreign ownership or prohibitions on the
repatriation of assets, and may have less protection of property rights than
developed countries.

The economies of developing countries may be predominantly based on only a few
industries or dependent on revenues from particular commodities or on
international aid or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from extreme and volatile
debt burdens or inflation rates. In addition, securities markets in developing
countries may trade a small number of securities and may be unable to respond
effectively to increased trading volume, potentially resulting in a lack of
liquidity and in volatility in the price of securities traded on those markets.
Also, securities markets in developing countries typically offer less regulatory
protection for investors.

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 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 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
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.

Investing in Securities of Other Investment Companies

The Fund may invest its assets in securities of other investment companies as an
efficient means of carrying out its investment policies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
may be subject to such duplicate expenses.

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 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 ("NAV") per Share fluctuates and is based on the
market value of all securities and other assets of the Fund. The NAV for each
class of Shares may differ due to the variance in daily net income realized by
each class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.

All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The NAV is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time) every day the New York Stock Exchange is open.

INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the characteristics
described below.

<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Minimum and Subsequent $1,500/$100 $1,500/$100 $1,500/$100
Investment Amounts
Minimum and Subsequent $ 250/$100 $ 250/$100 $ 250/$100
Investment Amount
for Retirement Plans
Maximum Sales Charge 5.50%* None None
Maximum Contingent None 5.50%+ 1.00%#
Deferred Sales
Charge**
Conversion Feature No Yes++ No
</TABLE>

* Class A Shares are sold at NAV, plus a sales charge as follows:

<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Concession as
Public Net a Percentage of
Offering Amount Public Offering
Amount of Transaction Price Invested 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>

** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption.

+ The following contingent deferred sales charge schedule applies to Class B
Shares:

Year of Redemption Contingent 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 B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase. See "Conversion of Class B Shares."
# The contingent deferred sales charge is assessed on Shares redeemed within
one year of their purchase date.

PURCHASING 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 intermediary (such as a bank or broker/dealer) or by sending a wire or
check directly to the Fund. Financial intermediaries may impose different
minimum investment requirements on their customers. An account must be
established with a financial intermediary or by completing, signing, and
returning the new account form available from the Fund before Shares can be
purchased. Shareholders in certain other funds advised and distributed by
affiliates of Federated Investors ("Federated Funds") may exchange their Shares
for Shares of the corresponding class of the Fund. The Fund reserves the right
to reject any purchase or exchange request.

In connection with any sale, Federated Securities Corp., may, from time to time,
offer certain items of nominal value to any shareholder or investor.

Purchasing Shares Through a
Financial Intermediary

Orders placed through a financial intermediary are considered received when the
Fund is notified of the purchase order or when payment is converted into federal
funds. Purchase orders through a 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 intermediaries must be
received by the financial intermediary 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 intermediary's responsibility to transmit orders promptly.
Financial intermediaries may charge fees for their services.

The financial intermediary 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 intermediaries may be subject to reclaim by the
distributor for accounts transferred to financial intermediaries which do not
maintain investor accounts on a fully disclosed basis and do not account for
share ownership periods.

Purchasing Shares by Wire

Shares may be purchased by Federal Reserve wire by calling the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Shareholder Services Company, c/o State Street
Bank and Trust Company, Boston, MA 02266-8600; Attention; EDGEWIRE; For Credit
to: (Fund Name) (Fund Class); (Fund Number--this number can be found on the
account statement or by contacting the Fund); 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.

Purchasing Shares by Check

Shares may be purchased by mailing 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, MA 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).

Systematic Investment Program

Under this program, funds, in a minimum amount of $50 may be automatically
withdrawn periodically from the shareholder's checking account at an Automated
Clearing House ("ACH") member and invested in the Fund. Shareholders should
contact their financial intermediary or the Fund to participate in this program.

Retirement Plans

Fund Shares can be purchased as an investment for retirement plans or Individual
Retirement Accounts ("IRA"). For further details, contact the Fund and consult a
tax adviser.

Class A Shares
Class A Shares are sold at NAV, plus a sales charge. However:

No sales charge is imposed for Class A Shares purchased:

. through financial intermediaries that do not receive sales charge dealer
concessions;

. by Federated Life Members; or

. through "wrap accounts" or similar programs under which clients pay a fee for
services.

In addition, the sales charge can be reduced or eliminated by:

. purchasing in quantity and accumulating purchases at the levels in the table
under "Investing in the Fund";

. combining concurrent purchases of two or more funds;

. signing a letter of intent to purchase a specific quantity of shares within
13 months; or

. using the reinvestment privilege.

Consult a financial intermediary or Federated Securities Corp. for details on
these programs. In order to eliminate the sales charge or receive sales charge
reductions, Federated Securities Corp. must be notified by the shareholder in
writing or by a financial intermediary at the time of purchase.

Dealer Concession

For sales of Class A 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. 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 establishment of customer accounts and
purchases of Shares.

Class B Shares

Class B Shares are sold at NAV. Under certain circumstances, a contingent
deferred sales charge will be assessed at the time of a redemption. Orders for
$250,000 or more of Class B Shares will automatically be invested in Class A
Shares.

Conversion of Class B Shares

Class B Shares will automatically convert into Class A Shares after eight full
years from the purchase date. Such conversion will be on the basis of the
relative NAVs per Share, without the imposition of any charges. Class B Shares
acquired by exchange from Class B Shares of another Federated Fund will convert
into Class A Shares based on the time of the initial purchase.

Class C Shares

Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00% will
be charged on assets redeemed within the first full 12 months following
purchase.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Shares of the same
class of other Federated Funds on days on which the Fund computes its NAV.
Shares are redeemed at NAV less any applicable contingent deferred sales charge.
Redemption proceeds will normally be sent the following day. However, in order
to protect shareholders of the Fund from possible detrimental effects of
redemptions, the Adviser may cause a delay of two to seven days in sending
redemption proceeds during certain periods of market volatility or for certain
shareholders. Exchanges are made at NAV. Shareholders who desire to
automatically exchange Shares, of a like class, in a pre-determined amount on a
monthly, quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.

Redeeming or Exchanging Shares Through a Financial Intermediary

Shares of the Fund may be redeemed or exchanged by contacting your financial
intermediary before 4:00 p.m. (Eastern time). In order for these transactions to
be processed at that day's NAV, financial intermediaries (other than
broker/dealers) must transmit the request to the Fund before 4:00 p.m. (Eastern
time), while broker/dealers must transmit the request to the Fund before 5:00
p.m. (Eastern time). The financial intermediary is responsible for promptly
submitting transaction requests and providing proper written instructions.
Customary fees and commissions may be charged by the financial intermediary for
this service. Appropriate authorization forms for these transactions must be on
file with the Fund.

Redeeming or Exchanging Shares by Telephone

Shares acquired directly from the Fund may be redeemed in any amount, or
exchanged, by calling 1-800-341-7400. Appropriate authorization forms for these
transactions must be on file with the Fund. Shares held in certificate form must
first be returned to the Fund as described in the instructions under "Redeeming
or Exchanging Shares by Mail." Redemption proceeds will either 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 ACH will not be
wired until that method of payment has cleared.

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 or Exchanging Shares By Mail" should be considered. The
telephone transaction privilege may be modified or terminated at any time.
Shareholders would be promptly notified.

Redeeming or Exchanging Shares by Mail

Shares may be redeemed in any amount, or exchanged, by mailing a written request
to: Federated Shareholder Services Company, Fund Name, Fund Class, P.O. Box
8600, Boston, MA 02266-8600. If share certificates have been issued, they must
accompany the written request. It is recommended that certificates be sent
unendorsed by registered or certified mail.

All written requests should state: Fund Name and the Share Class name; the
account name as registered with the Fund; the account number; and the number of
Shares to be redeemed or the dollar amount of the transaction. An exchange
request should also state the name of the Fund into which the exchange is to be
made. All owners of the account must sign the request exactly as the Shares are
registered. A check for redemption proceeds is normally mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request. Dividends are paid up to and including the day that
a redemption or exchange request is processed.

Requirements for Redemption

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.

Requirements for Exchange

Shareholders must exchange Shares having an NAV equal to the minimum investment
requirements of the fund into which the exchange is being made. Contact your
financial intermediary directly or the Fund for free information on and
prospectuses for the Federated Funds into which your Shares may be exchanged.
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. Signature guarantees will be required to exchange
between fund accounts not having identical shareholder registrations. The
exchange privilege may be modified or terminated at any time. Shareholders will
be notified of the modification or termination of the exchange privilege.

Systematic Withdrawal Program

Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder of not less than $100. 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 intermediary or by calling the Fund.

Because participation in this program may reduce, and eventually deplete the
shareholder's investment in the Fund, payments under this program should not be
considered as yield or income. It is not advisable for shareholders to continue
to purchase Class A Shares subject to a sales charge while participating in this
program. A contingent deferred sales charge may be imposed on Class B and C
Shares.

Contingent Deferred Sales Charge

The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. 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. The contingent deferred sales charge will not be imposed with respect to
Shares acquired through the reinvestment of dividends or distributions of
long-term capital gains. In determining the applicability of the contingent
deferred sales charge, the required holding period for your new Shares received
through an exchange will include the period for which your original Shares were
held.

Eliminating the Contingent Deferred Sales Charge

Upon written notification to Federated Securities Corp. or the transfer agent,
no contingent deferred sales charge will be imposed on redemptions:

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

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

. which are involuntary redemptions of shareholder accounts that do not comply
with the minimum balance requirements;

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

. which are reinvested in the Fund under the reinvestment privilege;

. 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 intermediary that sells Shares of the Fund pursuant to a sales
agreement with the distributor, and their immediate family members to the
extent that no payments were advanced for purchases made by these persons; and

. of Shares originally purchased through a bank trust department, an investment
adviser registered under the Investment Advisers Act of 1940 or retirement
plans where the third party administrator has entered into certain
arrangements with Federated Securities Corp. or its affiliates, or any other
financial intermediary, to the extent that no payments were advanced for
purchases made through such entities.

For more information regarding the elimination of the contingent deferred sales
charge through a Systematic Withdrawal Program, or any of the above provisions,
contact your financial intermediary or the Fund. The Fund reserves the right to
discontinue or modify these provisions. Shareholders will be notified of such
action.

ACCOUNT AND SHARE INFORMATION

Confirmations and Account Statements

Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends paid.
The Fund will not issue share certificates.

Dividends and Distributions

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Net long-term capital gains realized by the Fund, if
any, will be distributed 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 without a sales charge, unless
shareholders request cash payments on the new account form or by contacting the
transfer agent.

Accounts with Low Balances

Due to the high cost of maintaining accounts with low balances, the Fund may
close an account by redeeming all Shares and paying the proceeds to the
shareholder if the account balance falls below the applicable minimum investment
amount. Retirement plan accounts and accounts where the balance falls below the
minimum due to NAV changes will not be closed in this manner. Before an account
is closed, the shareholder will be notified and allowed 30 days to purchase
additional Shares to meet the minimum.

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 Directors handles the Directors' responsibilities
between meetings of the Directors.

Investment Adviser

Investment decisions for the Fund are made by Federated Global Research Corp.,
the Fund's Adviser, subject to direction by the Directors. 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.

Advisory Fees

The 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 Adviser
may voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The Adviser can terminate this voluntary
reimbursement of expenses at any time at its sole discretion.

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

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $120 billion invested across more
than 300 funds under management and/or administration by its subsidiaries, as
of December 31,1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated Funds are presently at work in and through approximately 4,000
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.

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 Wharton School of the University of Pennsylvania.

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 Directors, and could
result in severe penalties.

Distribution of Shares

Federated Securities Corp. is the principal distributor for Shares of the Fund.
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 1.00%
of the NAV 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 5.50% of the NAV 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 0.75% 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 0.75% 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 0.25% of the average daily NAV 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

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
Fee Daily Net Assets
<S> <C>
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% 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 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

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.

Directors may be removed by the Directors or 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.

As of January 7, 1998, the following shareholder of record owned 25% or more of
the outstanding Class F Shares of the Fund: Merrill Lynch Pierce Fenner & Smith
(as record owner holding Class F Shares for its clients) owned approximately
318,834 Class F Shares (40.52%) 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.

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

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 SEC) 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.

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, 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
$250.

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.

NOTES

[LOGO] FEDERATED INVESTORS

Federated World
Utility Fund

(A Portfolio of World Investment
Series, Inc.)

Class A Shares, Class B Shares,

Class C Shares

Prospectus
January 31, 1998

An Open-End, Diversified

Management Investment Company

Federated World
Utility Fund

Class A Shares
Class B Shares

Class C Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Distributor

Federated Securities Corp.
Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

Investment Adviser

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

Custodian

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

Transfer Agent
and Dividend
Disbursing Agent

Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

Independent Auditors

Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

Federated Securities Corp., Distributor

1-800-341-7400

- ----------------------------
www.federatedinvestors.com
- ----------------------------

Cusip 981487101
Cusip 981487309
Cusip 981487408
G00440-03 (1/98)

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, 1998

TABLE OF CONTENTS

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

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

General Information.............................................. 3
Calling the Fund.............................................. 3

Investment Information........................................... 3
Investment Objective.......................................... 3
Investment Policies........................................... 3

Convertible Securities........................................ 4

Risk Factors and Investment Considerations................... 4
Risk Considerations in Developing Countries.................. 6
U.S. Government Policies..................................... 6
Other Investment Practices................................... 6

Investment Limitations....................................... 8

Net Asset Value.................................................. 8

Investing in the Fund............................................ 8

Purchasing Shares................................................ 8
Purchasing Shares Through a
Financial Intermediary.................................... 9
Purchasing Shares by Wire.................................... 9
Purchasing Shares by Check................................... 9
Systematic Investment Program................................ 9
Retirement Plans............................................. 9
Reducing or Eliminating the Sales Charge..................... 9

Redeeming and Exchanging Shares.................................. 10

Redeeming or Exchanging Shares Through
a Financial Intermediary.................................. 10

Redeeming or Exchanging Shares by Telephone.................. 10
Redeeming or Exchanging Shares by Mail....................... 10
Requirements for Redemption.................................. 11
Requirements for Exchange.................................... 11
Systematic Withdrawal Program................................ 11
Contingent Deferred Sales Charge............................. 11

Account and Share Information.................................... 12
Confirmations and Account Statements......................... 12
Dividends and Distributions.................................. 12
Accounts with Low Balances................................... 12

Corporation Information.......................................... 12

Management of the Corporation................................ 12
Distribution of Class F Shares............................... 13
Administration of the Fund................................... 14
Brokerage Transactions....................................... 14

Shareholder Information.......................................... 14

Tax Information.................................................. 14
Federal Income Tax........................................... 14
State and Local Taxes........................................ 15

Performance Information 15

Other Classes of Shares.......................................... 15

<TABLE>
<CAPTION>
SUMMARY OF FUND EXPENSES

Class F Shares
Shareholder Transaction Expenses
<S> <C>
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
</TABLE>

<TABLE>
<CAPTION>
Annual Operating Expenses
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(2)..................................................................................... 0.00%
12b-1 Fee (after waiver)(3).......................................................................................... 0.00%
Total Other Expenses (after expense reimbursement) .................................................................. 1.49%
Shareholder Services Fee............................................................................... 0.25%
Total Operating Expenses(4).......................................................................................... 1.49%
</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. For a more complete description, 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 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, 1998. The total
operating expenses were 1.40% for the fiscal year ended November 30, 1997
and would have been 3.14% absent the voluntary waiver of the management fee
and 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 the Fund" and "Corporation Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.

Example
- ------------------------------------------------------------------------------
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.

<S> <C>
1 Year ........................................................................... $ 35
3 Years ........................................................................... $ 68
5 Years ........................................................................... $ 91
10 Years ........................................................................... $186
You would pay the following expenses on the same investment, assuming no redemption.
1 Year ........................................................................... $ 25
3 Years ........................................................................... $ 57
5 Years ........................................................................... $ 91
10 Years ........................................................................... $186
</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

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. 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,
1997 1996 1995 1994(a)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.70 $ 10.96 $ 9.66 $ 10.04
Income from investment operations
Net investment income 0.29 0.43 0.43 0.21
Net realized and unrealized gain (loss) on investments
and foreign currency 1.98 1.67 1.25 (0.43)
Total from investment operations 2.27 2.10 1.68 (0.22)
Less distributions
Distributions from net investment income (0.38) (0.36) (0.38) (0.16)
Distributions from net realized gain on investments and
foreign currency transactions (0.43) -- -- --
Total distributions (0.81) (0.36) (0.38) (0.16)
Net asset value, end of period $ 14.16 $ 12.70 $10.96 $ 9.66
Total return(b) 18.99% 19.55% 17.79% (3.07%)
Ratios to average net assets
Expenses 1.40% 1.07% 0.50% 0.50%*
Net investment income 2.17% 3.87% 4.19% 4.59%*
Expense waiver/reimbursement(c) 1.74% 3.34% 4.78% 4.43%*
Supplemental data
Net assets, end of period (000 omitted) $10,679 $ 8,396 $6,028 $ 4,821
Average commission rate paid(d) $0.0004 $0.0001 -- --
Portfolio turnover 52% 50% 46% 7%
</TABLE>

(b) Based on net asset value, which does not reflect the sale 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 expenses and net
investment income ratios shown above.

(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Corporation was incorporated under the laws of the State of Maryland on
January 25, 1994. 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 F Shares ("Shares").
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.

The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

Calling the Fund Call the Fund at 1-800-341-7400.

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

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 Services ("S&P") or Baa or
better by Moody's Investors Service, Inc., ("Moody's") or (ii) determined by the
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 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 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 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 Adviser), such event will be considered by the 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.

Convertible Securities

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

Risk Factors and Investment Considerations

Considerations of Utility Securities

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

Electric

Telecommunications

Gas

Water

Exchange Rates

Foreign Companies

Risk Considerations in
Developing Countries

U.S. Government Policies

Other Investment Practices
Foreign Currency Transactions

Forward Foreign Currency Exchange Contracts

Repurchase Agreements

Lending of Portfolio Securities

Investing in Securities of Other Investment Companies

Restricted and Illiquid Securities

When-Issued and Delayed Delivery Transactions

Covered Call Options

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 of
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

INVESTING IN THE FUND

<TABLE>
<CAPTION>
This prospectus offers Class F Shares with the characteristics described below.

Class F
----------
<S> <C>
Minimum and Subsequent Investment Amount $1500/$100
Minimum and Subsequent Investment Amount $ 250/$100
for Retirement Plans
Maximum Sales Charge 1.00%*
Maximum Contingent Deferred Sales Charge** 1.00%**
</TABLE>

* There is no sales charge for purchases of $1 million or more. In addition, no
sales charge is imposed for Shares purchased through certain entities or
programs. Please see the section entitled "Reducing or Eliminating the Sales
Charge."

** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption. The
following contingent deferred sales charge schedule applies to Class F
Shares:

<TABLE>
<CAPTION>
Contingent
Deferred
Amount of Purchase Shares Held Sales Charge
<S> <C> <C>
Up to $1,999,999 Four Years or less 1.00%
$2,000,000 to $4,999,999 Two Years or less 0.50%
$5,000,000 or more One Year or less 0.25%
</TABLE>

PURCHASING 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 intermediary (such as a bank or broker/dealer) or by sending a wire or
check directly to the Fund. Financial intermediaries may impose different
minimum investment requirements on their customers. An account must be
established with a financial intermediary or by completing, signing, and
returning the new account form available from the Fund before Shares can be
purchased. Shareholders in Class F Shares of certain other funds advised and
distributed by affiliates of Federated Investors ("Federated Funds") may
exchange their Shares for Class F Shares of the Fund. The Fund reserves the
right to reject any purchase or exchange request.

In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor.

Purchasing Shares Through
a Financial Intermediary

The financial intermediary which maintains investor accounts in Class F 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 intermediaries may be subject to reclaim by the distributor for
accounts transferred to financial intermediaries which do not maintain investor
accounts on a fully disclosed basis and do not account for share ownership
periods.

Purchasing Shares by Wire

Purchasing Shares by Check

Systematic Investment Program

Under this program, funds in a minimum amount of $50 may be automatically
withdrawn periodically from the shareholder's checking account at an Automated
Clearing House ("ACH") member and invested in the Fund. Shareholders should
contact their financial intermediary or the Fund to participate in this program.

Retirement Plans

Fund Shares can be purchased as an investment for retirement plans or Individual
Retirement Accounts ("IRA"). For further details, contact the Fund and consult a
tax adviser.

Reducing or Eliminating the Sales Charge

Class F Shares are sold at NAV, plus a sales charge. However:

No sales charge is imposed for Class F Shares purchased:

. through bank trust departments or investment advisers registered under the
Investment Advisers Act of 1940 purchasing on behalf of their clients;

. by sales representatives, Directors, and employees of the Fund, Federated
Advisers, Federated Securities Corp. or their affiliates and their immediate
family members;

. by any investment dealer who has a sales agreement with Federated Securities
Corp. and their immediate family members, or by 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.

In addition, the sales charge can be reduced or eliminated by:

. purchasing in quantity and accumulating purchases;

. combining concurrent purchases of two or more funds;

. signing a letter of intent to purchase a specific quantity of shares within
13 months; or

. using the reinvestment privilege.

Dealer Concession

For sales of Shares, a dealer will normally receive up to 100% 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. The sales charge for
Shares sold other than through registered broker/dealers will be retained by
Federated Securities Corp.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Class F Shares of
other Federated Funds on days on which the Fund computes its NAV. Shares are
redeemed at NAV less any applicable contingent deferred sales charge. Redemption
proceeds will normally be sent the following day. However, in order to protect
shareholders of the Fund from possible detrimental effects of redemptions, the
Adviser can cause a delay of two to seven days in sending redemption proceeds
during certain periods of market volatility or for certain shareholders.
Exchanges are made at NAV. Shareholders who desire to automatically exchange
Shares, of a like Share class, in a pre-determined amount on a monthly,
quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.

Redeeming or Exchanging Shares Through a Financial Intermediary

Redeeming or Exchanging Shares
by Telephone

Redeeming or Exchanging Shares by Mail

Requirements for Redemption

Requirements for Exchange

Shareholders must exchange Shares having a NAV equal to the minimum investment
requirements of the fund into which the exchange is being made. Contact your
financial intermediary directly or the Fund for free information on and
prospectuses for the Federated Funds into which your Shares may be exchanged.
Before the exchange, the shareholder must receive a prospectus of the fund for
which the exchange is being made.

Systematic Withdrawal Program

Because participation in this program may reduce, and eventually deplete, the
shareholder's investment in the Fund, payments under this program should not be
considered as yield or income. It is not advisable for shareholders to continue
to purchase Class F Shares subject to a sales charge while participating in this
program. A contingent deferred sales charge will be imposed on Shares redeemed
through this program within four years of their purchase dates.

Contingent Deferred Sales Charge

Eliminating the Contingent Deferred Sales Charge

Upon written notification to Federated Securities Corp. or the transfer agent,
no contingent deferred sales charge will be imposed on redemptions:

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

. representing a total or partial distribution from an IRA, Keogh Plan, or a
custodial account to a shareholder who has attained the age of 70-1/2;

. representing a total or partial distribution from a qualified plan, other
than an Individual Retirement Account, Keogh Plan, or a custodial account
following retirement;

. which are involuntary redemptions of shareholder accounts that do not comply
with the minimum balance requirements;

. which are reinvested in the Fund under the reinvestment privilege;

For more information regarding the contingent deferred sales charge or any of
the above provisions, contact your financial intermediary or the Fund. The Fund
reserves the right to discontinue or modify these provisions. Shareholders will
be notified of such action.

ACCOUNT AND SHARE INFORMATION

Confirmations and Account Statements

Dividends and Distributions

Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Net long-term capital gains realized by the Fund, if
any, will be distributed 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 NAV without a sales charge, unless
shareholders request cash payments on the new account form or by contacting the
transfer agent.

Accounts with Low Balances

CORPORATION INFORMATION

Management of the Corporation

Board of Directors

Investment Adviser

Advisory Fees

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

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.

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $120 billion invested across more
than 300 funds under management and/or administration by its subsidiaries, as
of December 31, 1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated Funds are presently at work in and through approximately
4,000 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.

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 Wharton School
of the University of Pennsylvania.

Distribution of Class F Shares

Federated Securities Corp. is the principal distributor for Shares. 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 0.25% of the average daily NAV 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 0.25% of the average daily NAV 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, 0.50% of the offering price on purchases of $2,000,000 to
$4,999,999, and 0.25% 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

Administration of the Fund
Administrative Services

<TABLE>
<CAPTION>
Maximum Average Aggregate
Fee Daily Net Assets
- -------- -----------------------------------
<S> <C>
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% 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 Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet this criteria, the Adviser may give consideration to those
firms which have sold or are selling Shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Directors.

SHAREHOLDER INFORMATION

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.

As of January 7, 1998, the following shareholder of record owned 25% or more of
the outstanding Class F Shares of the Fund: Merrill Lynch Pierce Fenner & Smith
(as record owner holding Class F Shares for its clients), owned approximately
318,834 Class F Shares (40.52%) 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.

TAX INFORMATION

Federal Income Tax

State and Local Taxes

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 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 SEC) 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 $1,500, unless the investment is in a retirement account, in which
case the minimum investment is $250.

Class B Shares are sold at NAV 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 $250.

Class C Shares are sold at NAV 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 $250. 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 A Shares, Class B Shares,
and Class C Shares, investors may call 1-800-341-7400 or contact their financial
institution.

Federated World
Utility Fund

(A Portfolio of World Investment
Series, Inc.)

Class F Shares

Prospectus
January 31, 1998

An Open-End, Diversified Management
Investment Company

Federated World
Utility Fund
Class F Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Distributor

Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Custodian

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

Transfer Agent
and Dividend
Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

Independent Auditors
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com

Cusip 981487200
4021404A-F (1/98)

FEDERATED 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 (the "Fund"), dated January 31, 1998, and the prospectus for Class F Shares
of the Fund, dated January 31, 1998. 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 FUNDS
5800 CORPORATE DRIVE

PITTSBURGH, PA 15237-7000

Statement dated January 31, 1998

[LOGO] FEDERATED INVESTORS

Federated Securities Corp., Distributor

Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Cusip 981487101
Cusip 981487200
Cusip 981487309
Cusip 981487408
4021404B (1/98)

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

General Information About the Fund 1
- ---------------------------------------------------

Investment Objective and Policies 1
- ---------------------------------------------------
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
Convertible Securities 1
Investing in Securities of Other
Investment Companies 2
Lending Portfolio Securities 2
Portfolio Turnover 2
Investment Limitations 2

World Investment Series, Inc. Management 4
- ---------------------------------------------------
Fund Ownership 7
Directors Compensation 8

Investment Advisory Services 8
- ---------------------------------------------------
Adviser to the Fund 8
Advisory Fees 9
Brokerage Transactions 9

Other Services 9
- ---------------------------------------------------
Fund Administration 9
Custodian and Portfolio Accountant 9
Transfer Agent 9
Independent Auditors 9

Purchasing Shares 10
- ---------------------------------------------------
Quantity Discounts and Accumulated Purchases 10
Concurrent Purchases 10
Letter of Intent 10
Reinvestment Privilege 10
Conversion of Class B Shares 10
Distribution Plan (Class B Shares,
Class C Shares and Class F Shares)
and Shareholder Services Agreement 11
Exchanging Securities for Fund Shares 12
Purchases by Sales Representatives,
Fund Directors, and Employees 12

Determining Net Asset Value 12
- ---------------------------------------------------
Determining Market Value of Securities 13
Trading in Foreign Securities 13

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
Contingent Deferred Sales Charge 14

Tax Status 15
- ---------------------------------------------------
The Fund's Tax Status 15
Shareholders' Tax Status 15

Total Return 15
- ---------------------------------------------------

Yield 15
- ---------------------------------------------------

Performance Comparisons 16
- ---------------------------------------------------
Economic and Market Information 18

About Federated Investors 18
- ---------------------------------------------------
Mutual Fund Market 18
Institutional Clients 18
Bank Marketing 18
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 18

Financial Statements 18
- ---------------------------------------------------

Appendix 19
- ---------------------------------------------------

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

The Fund is a portfolio in World Investment Series, Inc. (the "Corporation")
which was incorporated 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 four of the above-mentioned 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.

Reverse Repurchase Agreements

The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument in return for a percentage of the
instrument's market value in cash and agrees that on a stipulated date in the
future, the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but does not ensure
this result. However, liquid assets of the Fund, in a dollar amount sufficient
to make payment for the securities to be purchased, are: segregated on the
Fund's records at the trade date; marked to market daily; and maintained until
the transaction is settled.

Convertible Securities

Dividend Enhanced Convertible Securities ("DECS"), or similar instruments
marketed under different names, offer a substantial dividend advantage with the
possibility of unlimited upside potential if the price of the underlying common
stock exceeds a certain level. DECS convert to common stock at maturity. The
amount received is dependent on the price of the common stock at the time of
maturity. DECS contain two call options at different strike prices. The DECS
participate with the common stock up to the first call price. They are
effectively capped at that point unless the common stock rises above a second
price point, at which time they participate with unlimited upside potential.

Preferred Equity Redemption Cumulative Stock ("PERCS"), or similar instruments
marketed under different names, offer a substantial dividend advantage, but
capital appreciation potential is limited to a predetermined level. PERCS are
less risky and less volatile than the underlying common stock because their
superior income mitigates declines when the common stock falls, while the cap
price limits gains when the common stock rises.

Investing in Securities of Other Investment Companies

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

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,
1997 and 1996, the Fund's portfolio turnover rates were 52% and 50%,
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 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

Chairman and Director

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is the
father of J.Christopher Donahue, Executive Vice President of the Corporation.

- --------------------------------------------------------------------------------
Thomas G. Bigley
15 Old Timber Trail
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.; Director, Member of
Executive Committee, 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

President and Director

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.

- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.@
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.

- --------------------------------------------------------------------------------
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; Director or Trustee of the Funds.

- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Director

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.

- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Director

Public Relations/Marketing/Conference Planning; 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, Chairman and Director of the Company.

- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; 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; 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 Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; 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; WesMark Funds; WCT Funds; 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 January 7, 1998, no shareholders of record owned 5% or more of the
outstanding Class A Shares of the Fund.

As of January 7, 1998, 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 130,226 shares (11.26%).

As of January 7, 1998, 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 26,607 shares (18.48%); and Donaldson Lufkin Jenrette Securities
Corporation Inc., Jersey City, New Jersey (as record owner holding Class C
Shares for its clients), owned approximately 7,408 shares (5.15%).

As of January 7, 1998, 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 318,834 shares (40.52%).

Directors Compensation
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION PAID
NAME, COMPENSATION TO DIRECTORS FROM
POSITION WITH FROM THE THE CORPORATION
THE CORPORATION CORPORATION*# AND FUND COMPLEX+
- --------------------------------------------------------------------------------
<S> <C> <C>

John F. Donahue, $ -0- $-0- for the Corporation and
Chairman and Director 56 investment companies

Thomas G. Bigley $1,149 $111,222 for the Corporation and
Director 56 investment companies

John T. Conroy, Jr., $1,265 $122,362 for the Corporation and
Director 56 investment companies

William J. Copeland, $1,265 $122,362 for the Corporation and
Director 56 investment companies

James E. Dowd, $1,265 $122,362 for the Corporation and
Director 56 investment companies

Lawrence D. Ellis, M.D., $1,149 $111,222 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., $1,265 $122,362 for the Corporation and
Director 56 investment companies

Peter E. Madden, $1,149 $111,222 for the Corporation and
Director 56 investment companies

John E. Murray, Jr., $1,149 $111,222 for the Corporation and
Director 56 investment companies Complex

Wesley W. Posvar, $1,149 $111,222 for the Corporation and
Director 56 investment companies

Marjorie P. Smuts, $1,149 $111,222 for the Corporation and
Director 56 investment companies
- --------------------------------------------------------------------------------
</TABLE>

* Information is furnished for the fiscal year ended November 30, 1997.

# The aggregate compensation provided is for the Corporation, which is
comprised of 8 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 years ended
November 30, 1997 and 1996, the Adviser earned $360,983 and $214,584, of which
$358,968 and $204,186 were 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.

Brokerage Transactions

The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
For the fiscal years ended November 30, 1997, 1996 and 1995, the Fund paid total
brokerage commissions of $117,108, $48,762, and $28,019, 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
- --------------------------------------------------------------------------------

Fund Administration

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in each
prospectus. From March 17, 1994, to March 1, 1996, Federated Administrative
Services, also a subsidiary of Federated Investors, served as the Fund's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal years ended
November 30, 1997, 1996 and 1995, the Administrators earned $215,000, $215,000,
and $175,713, respectively.

Custodian and Portfolio Accountant

State Street Bank and Trust Company ("State Street Bank"), 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, Pittsburgh, PA.

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 "Purchasing Shares" and "Investing in the Fund." For further
information on any of the programs listed below please contact your financial
intermediary or Federated Securities Corp.

Quantity Discounts and Accumulated Purchases

As described in the prospectuses, larger purchases of the same Share class
reduce or eliminate the sales charge paid. For example, the Fund will combine
all Class A Shares 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. This combined purchase option is available within Class F
Shares as well. 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 into the same Share class 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%.

In addition, the Fund will also combine purchases for the purpose of reducing
the contingent deferred sales charge imposed on Class F Share redemptions. For
example, if a shareholder already owns Class F Shares having current value at
the 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 Class F Shares.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial intermediary at the
time the purchase is made that Class A Shares or Class F Shares are already
owned or that purchases are being combined. The Fund will reduce or eliminate
the sales charge after it confirms the purchases.

Concurrent Purchases

Shareholders have the privilege of combining concurrent purchases of the same
Share class of two or more funds in the Federated Complex in calculating the
applicable sales charge.

To receive a sales charge reduction or elimination, Federated Securities Corp.
must be notified by the shareholder in writing or by his financial intermediary
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

A shareholder can sign a letter of intent committing to purchase a certain
amount of the same Share class within a 13 month period in order to combine such
purchases in calculating the applicable sales charge. The Fund's custodian will
hold Shares in escrow equal to the maximum applicable sales charge. If the
shareholder completes the commitment, the escrowed Shares will be released to
their account. If the commitment is not completed within 13 months, the
custodian will redeem an appropriate number of escrowed Shares to pay for the
applicable sales charge.

The letter of intent for Class F Shares also includes a provision for reductions
in the contingent deferred sales charge and holding period depending on the
amount actually purchased within the 13-month period.

While this letter of intent will not obligate the shareholder to purchase Class
A Shares or Class F 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 or Class F Shares of any Federated Funds, excluding money market
accounts, will be aggregated to provide a purchase credit towards fulfillment of
the letter of intent. The letter may be dated as of a prior date to include any
purchase made within the past 90 days. Prior trade prices will not be adjusted.

Reinvestment Privilege

The reinvestment privilege is available for all Shares of the Fund within the
same Share Class.

Class A and Class F shareholders who redeem from the Fund may reinvest the
redemption proceeds back into the same Share class at the next determined net
asset value without any sales charge. The original shares must have been subject
to a sales charge and the reinvestment must be within 120 days.

Similarly, Class C and Class F shareholders who redeem may reinvest their
redemption proceeds in the same Share class within 120 days. Class B Shares also
may be reinvested within 120 days of redemption, although such reinvestment will
be made into Class A Shares. Shareholders would not be entitled to a
reimbursement of the contingent deferred sales charge if paid at the time of
redemption on any Share class. However, reinvested shares would not be subject
to a contingent deferred sales charge, if otherwise applicable, upon later
redemption.

In addition, if the Shares were reinvested through a financial intermediary, the
financial intermediary would not be entitled to an advanced payment from
Federated Securities Corp. on the reinvested Shares, if otherwise applicable.
Federated Securities Corp. must be notified by the shareholder in writing or by
his financial intermediary of the reinvestment in order to eliminate a sales
charge or a contingent deferred sales charge. If the shareholder redeems Shares
in the Fund, there may be tax consequences.

Conversion of Class B Shares

Class B Shares will automatically convert into Class A Shares on or around the
15th of the month eight full years from the purchase date and will no longer be
subject to a fee under the distribution plan. 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 a 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.

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 years ended November 30, 1997 payments in the amounts of $66,779,
$10,969, and $23,607 were made pursuant to the Distribution Plan for Class B
Shares, Class C Shares and Class F Shares, respectively.

For the fiscal year ended November 30, 1997, payments in the amounts of $40,723,
$22,260, $3,656 and $23,607 were made pursuant to the Shareholder Services
Agreement for Class A Shares, Class B Shares, Class C Shares and Class F Shares,
respectively.

Federated Investors and its subsidiaries may benefit from arrangements where the
Rule 12b-1 Plan fees related to Class B Shares may be paid to third-party
financial providers who have advanced commissions to financial intermediaries.

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. 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.

Purchases by Sales Representatives, Fund Directors, and Employees

The following individuals and their immediate family members may buy Class A
Shares and Class F Shares at net asset value without a sales charge:

. Directors, employees, and sales representatives of the Fund, Federated
Global Research Corp., and Federated Securities Corp. and its affiliates;

. Federated Life Members (Class A Shares only);

. any associated person of an investment dealer who has a sales agreement with
Federated Securities Corp.; and

. trusts, pensions, or profit-sharing plans for these individuals.

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

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

The Fund's net asset value per Share fluctuates and is based on the market value
of all securities and other assets of the Fund. The net asset value for each
class of Shares may differ due to the variance in daily net income realized by
each class.

Net asset value is not determined 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, Martin Luther King Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

Determining Market Value of Securities

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

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

. according to the 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;

. at fair value as determined in good faith by the Directors; or

. for 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 "Redeeming and Exchanging 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.

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.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.

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; (3) Shares held for fewer than six years with respect to Class B
Shares and for less than one full year from the date of purchase with respect to
Class C Shares on a first-in, first-out basis.

Elimination of the Contingent Deferred Sales Charge--Class B Shares

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 an account 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. 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 annual
valuation date. 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. To the extent that
a shareholder exchanges Shares for Class B Shares of other Federated Funds,
the time for which the exchanged-for Shares are to be held will be added to
the time for which exchanged-from Shares were held for purposes of
satisfying the 12-month holding requirement. However, for purposes of
meeting the $10,000 minimum account value requirement, Class B Share
accounts will be not be aggregated. Any Shares purchased prior to the
termination of this program would have the contingent deferred sales charge
eliminated as provided in the Fund's prospectus at the time of the purchase
of the Shares.

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

The Fund's Tax Status

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

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

. invest in securities within certain statutory limits; and

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

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

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 Fund's average annual total returns based on offering price for the
following periods ended November 30, 1997, were:

<TABLE>
<CAPTION>
Date of Initial
Public
Share Class Investment One-Year Since Inception
- ----------------------------------------------------------------
<S> <C> <C> <C>
Class A April 21, 1994 12.52% 12.69%
Class B July 27, 1995 12.19% 16.43%
Class C July 27, 1995 17.15% 17.91%
Class F April 22, 1994 16.70% 13.85%
</TABLE>

The average annual total return for all classes of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the 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, adjusted over the period by any additional Shares, assuming a
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investments based
on the lesser of the original purchase price or the offering price of Shares
redeemed.

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

The Fund's yields for the thirty-day period ended November 30, 1997, were:

<TABLE>
<CAPTION>
Share Class Yield
- -------------------
<S> <C>
Class A 1.78%
Class B 1.15%
Class C 1.15%
Class F 1.86%
</TABLE>

The yield for all classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the Securities and Exchange
Commission) earned by any class of Shares over a thirty-day period by the
maximum offering price per Share of any class of Shares 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 twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by any
class of Shares because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.

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

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

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

. portfolio quality;

. average portfolio maturity;

. type of instruments in which the portfolio is invested;

. changes in interest rates and market value of portfolio securities;

. changes in the Fund's or a class of Shares' expenses; and

. various 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:

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

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

. Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds
whose portfolios are invested primarily in common stocks. In addition, the
Standard & Poor's index assumes reinvestments of all dividends paid by
stocks listed on its index. Taxes due on any of these distributions are not
included, nor are brokerage or other fees calculated in Standard & Poor's
figures.

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

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

. Dow Jones World Industry Index or its component indices, including, among
others, the utility sector.

. Standard & Poor's 500 Stock Index or its component indices--an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks, and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.

. The New York Stock Exchange composite or component indices--unmanaged
indices of all industrial, utilities, transportation, and finance stocks
listed on the New York Stock Exchange.

. Financial Times Actuaries Indices--including the FTA-World Index (and
components thereof), which are based on stocks in major world equity
markets.

. Lipper-Mutual Fund Performance Analysis and Lipper-Fixed Income Fund
Performance Analysis--measure of total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestment of all distributions,
exclusive of any applicable sales charges.

. Value Line Mutual Fund Survey, published by Value Line Publishing, Inc.--
analyzes price, yield, risk, and total return for equity and fixed income
mutual funds. The highest rating is one, and ratings are effective for two
weeks.

. Mutual Fund Source Book, published by Morningstar, Inc.--analyzes price,
yield, risk, and total return for equity and fixed income funds.

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

. Value Line Index--an unmanaged index which follows the stocks of
approximately 1,700 companies.

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

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

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

. Morgan Stanley Capital International World Indices, including, among others,
the Morgan Stanley Capital International Europe, Australia, Far East Index
("EAFE Index"). The EAFE index is an unmanaged index of more than 1,000
companies of Europe, Australia and the Far East.

. Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics--a statistical measure of change, over time, in the
price of goods and services in major expenditure groups.

. Strategic 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
Inc. 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--tructured, 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' international and 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 $4.4 trillion to the more than 6,700 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 Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.

Broker/Dealers and Bank Broker/Dealer Subsidiaries

Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country --supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The financial statements for the fiscal year ended November 30, 1997, are
incorporated herein by reference from the Fund's Annual Report dated November
30, 1997 (File Nos. 33-52149 and 811-7141). A copy of the Annual Report for the
Fund may be obtained without charge by contacting the Fund.

* Source: Investment Company Institute

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

Standard & Poor's Ratings Services ("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 Services 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 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 returns 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.

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,
1998, 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, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary of Fund Expenses............................. 1
Financial Highlights--Class A Shares................. 2
Financial Highlights--Class B Shares................. 3
Financial Highlights--Class C Shares................. 4
General Information.................................. 5
Calling the Fund.................................... 5
Investment Information............................... 5
Investment Objective................................ 5
Investment Policies................................. 5
Portfolio Turnover.................................. 12
Investment Limitations.............................. 13
Net Asset Value...................................... 13
Investing in the Fund................................ 13
Purchasing Shares.................................... 14
Purchasing Shares Through a Financial Intermediary.. 14
Purchasing Shares by Wire........................... 14
Purchasing Shares by Check.......................... 14
Systematic Investment Program....................... 14
Retirement Plans.................................... 14
Class A Shares...................................... 14
Class B Shares...................................... 15
Class C Shares...................................... 15
Redeeming and Exchanging Shares...................... 15
Redeeming or Exchanging Shares Through a
Financial Intermediary.............................. 15
Redeeming or Exchanging Shares by Telephone......... 16
Redeeming or Exchanging Shares by Mail.............. 16
Requirements for Redemption......................... 16
Requirements for Exchange........................... 16
Systematic Withdrawal Program....................... 16
Contingent Deferred Sales Charge.................... 17
Account and Share Information........................ 17
Confirmations and Account Statements................ 17
Dividends and Distributions......................... 17
Accounts with Low Balances.......................... 17
Corporation Information.............................. 17
Management of the Corporation....................... 17
Distribution of Shares.............................. 19
Administration of the Fund.......................... 20
Brokerage Transactions.............................. 20
Shareholder Information.............................. 20
Tax Information...................................... 20
Federal Income Tax.................................. 20
State and Local Taxes............................... 21
Performance Information 21
Appendix............................................. 21
</TABLE>

SUMMARY OF FUND EXPENSES

Shareholder Transaction Expenses

<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).............................................. 5.50% None None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).............................................. None None None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable)(1)........................................ None 5.50% 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............... None None None
Exchange Fee..................................................................... None None None

<CAPTION>
Annual Operating Expenses
(As a percentage of average net assets)

Management Fee (after waiver)(2)................................................. 0.00% 0.00% 0.00%
12b-1 Fee........................................................................ 0.00%(3) 0.75% 0.75%
Total Other Expenses (after expense reimbursement)............................... 1.85% 1.85% 1.85%
Shareholder Services Fee........................................................ 0.25% 0.25% 0.25%
Total Operating Expenses(4)...................................................... 1.85% 2.60%(5) 2.60%
</TABLE>

(1) For shareholders of Class B Shares, the contingent deferred sales charge is
5.50% in the first year declining to 1.00% in the sixth year and 0.00%
thereafter. For shareholders of Class C Shares, 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. For a more complete description, 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 1.10%.
(3) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1998. 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. For a more complete
description see "Corporation Information."

(4) The total operating expenses for Class A Shares, Class B Shares, and Class C
Shares, would have been 6.62%, 7.37%, and 7.37%, respectively, absent the
voluntary waiver of the management fee and the voluntary reimbursement of
certain other operating expenses.

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

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 Class A Class B Class C
<S> <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.
1 Year......................................................................................... $ 73 $ 83 $ 37
3 Years........................................................................................ $110 $124 $ 81
5 Years........................................................................................ $150 $161 $138
10 Years....................................................................................... $260 $274 $293
You would pay the following expenses on the same investment, assuming no redemption.
1 Year......................................................................................... $ 26 $ 26
3 Years........................................................................................ $ 81 $ 81
5 Years........................................................................................ $138 $138
10 Years....................................................................................... $274 $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

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 10.25 $ 10.00
Income from investment operations
Net operating loss (0.03) 0.00
Net realized and unrealized gain (loss) on investments and foreign
currency transactions (2.41) 0.25
Total from investment operations (2.44) 0.25
Net asset value, end of period $ 7.81 $ 10.25
Total return(b) (23.80%) 2.50%
Ratios to average net assets
Expenses 1.85% 1.85%*
Net operating loss (0.53%) --
Expense waiver/reimbursement(C) 4.77% 7.02%*
Supplemental data
Net assets, end of period (000 omitted) $ 7,297 $ 4,593
Average commission rate paid(d) $0.0098 $0.0039
Portfolio turnover 193% 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.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS--CLASS B SHARES

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 10.19 $ 10.00
Income from investment operations
Net operating loss (0.08) (0.03)
Net realized and unrealized gain (loss) on investments and foreign
currency transactions (2.38) 0.22
Total from investment operations (2.46) 0.19
Net asset value, end of period $ 7.73 $ 10.19
Total return(b) (24.14%) 1.90%
Ratios to average net assets
Expenses 2.60% 2.60%*
Net operating loss (1.25%) (0.86%)*
Expense waiver/reimbursement(C) 4.77% 7.02%*
Supplemental data
Net assets, end of period (000 omitted) $ 3,606 $ 2,273
Average commission rate paid(d) $0.0098 $ 0.0039
Portfolio turnover 193% 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.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS--CLASS C SHARES

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 10.20 $ 10.00
Income from investment operations
Net operating loss (0.12) (0.05)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (2.34) 0.25
Total from investment operations (2.46) 0.20
Net asset value, end of period $ 7.74 $ 10.20
Total return(b) (24.12%) 2.00%
Ratios to average net assets
Expenses 2.60% 2.60%*
Net operating loss (1.22%) (0.90%)*
Expense waiver/reimbursement(C) 4.77% 7.02%*
Supplemental data
Net assets, end of period (000 omitted) $ 511 $ 397
Average commission rate paid(d) $0.0098 $ 0.0039
Portfolio turnover 193% 99%
</TABLE>

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Corporation was incorporated under the laws of the state of Maryland on
January 25, 1994. Class A Shares, Class B Shares and Class C Shares of the Fund
("Shares") are designed for individuals and institutions seeking long-term
growth of capital by investing primarily in equity securities of Asian and
Pacific Rim companies.

The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

Calling the Fund Call the Fund at 1-800-341-7400.

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 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.

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 Board of Directors (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, including convertible 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

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

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.

The debt securities in which the Fund may invest may be rated, at the time of
purchase, as low as C by Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch") or Moody's Investors Service, Inc.
("Moody's"), or, if unrated, are of comparable quality as determined by the
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

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as DECS--
(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS--(Liquid Yield Option Notes, which are
corporate bonds that are purchased at prices below par with no coupons and are
convertible into stock), PERCS--(Preferred Equity Redemption Cumulative Stock,
an equity issue that pays a high cash dividend, has a cap price and mandatory
conversion to common stock at maturity), and PRIDES--(Preferred Redeemable
Increased Dividend Securities, which are essentially the same as DECS; the
difference is little more than who initially underwrites the issue).

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests. Please see
"Risk Factors Relating to Investing in High Yield Securities."

Investing in Securities of Other Investment Companies

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.

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

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

Foreign Currency Transactions

The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Fund to protect against a decline
in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund. Further,
the Fund may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations. Cross-
hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.

Forward Foreign Currency Exchange Contracts

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

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.

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

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.

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

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

Swap Agreements

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.

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

Currency Risks

Because the majority of 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 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.

Portfolio Turnover

The Fund does not attempt to set or meet any specific portfolio turnover rate,
since turnover is incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. High turnover rates may result in higher
brokerage commissions and capital gains. See "Tax Information" in this
prospectus.

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

All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The NAV is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m. Eastern time) every day the New York Stock Exchange is open Investing
in the Fund

INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the characteristics
described below.

Class A Class B Class C
<S> <C> <C> <C>
Minimum and Subsequent
Investment Amounts $1500/$100 $1500/$100 $1500/$100
Minimum and Subsequent $ 250/$100 $ 250/$100 $ 250/$100
Investment Amount for
Retirement Plans
Maximum Sales Charge 5.50%* None None
Maximum Contingent
Deferred Sales Charge** None 5.50%+ 1.00%#
Conversion Feature No Yes++ No

</TABLE>

* Class A Shares are sold at NAV, plus a sales charge as follows:

Sales Charge Dealer
as a Percentage of Concession as
Public Net a Percentage of
Offering Amount Public Offering
Amount of Transaction Price Invested 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>

** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption.

+ The following contingent deferred sales charge schedule applies to Class B
Shares:

Year of Redemption Contingent 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>

PURCHASING SHARES

In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor.

Purchasing Shares Through a
Financial Intermediary

Purchasing Shares by Wire

Shares may be purchased by Federal Reserve wire by calling the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Shareholder Services Company, c/o State Street
Bank and Trust Company, Boston, MA 02266-8600; Attention: EDGEWIRE; For Credit
to: (Fund Name) (Fund Class); (Fund Number--this number can be found on the
account statement or by contacting the Fund); 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.

Purchasing Shares by Check

Systematic Investment Program

Retirement Plans

Fund Shares can be purchased as an investment for retirement plans or Individual
Retirement Accounts ("IRA"). For further details, contact the Fund and consult a
tax adviser.

Class A Shares

Class A Shares are sold at NAV, plus a sales charge. However:

No sales charge is imposed for Class A Shares purchased:

. through financial intermediaries that do not receive sales charge dealer
concessions;

. by Federated Life Members; or

. through "wrap accounts" or similar programs under which clients pay a fee for
services.

In addition, the sales charge can be reduced or eliminated by:

. purchasing in quantity and accumulating purchases at the levels in the table
under "Investing in the Fund";

. combining concurrent purchases of two or more funds;

. signing a letter of intent to purchase a specific quantity of shares within
13 months; or

. using the reinvestment privilege.

Dealer Concession

Class B Shares

Conversion of Class B Shares

Class C Shares

Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00% will
be charged on assets redeemed within the first full 12 months following
purchase.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Shares of the same
class of other Federated Funds on days on which the Fund computes its NAV.
Shares are redeemed at NAV less any applicable contingent deferred sales charge.
However, in order to protect shareholders of the Fund from possible detrimental
effects of redemptions, the Adviser may cause a delay of two to seven days in
sending redemption proceeds during certain periods of market volatility or for
certain shareholders. Exchanges are made at NAV. Shareholders who desire to
automatically exchange Shares, of a like class, in a pre-determined amount on a
monthly, quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.

Redeeming or Exchanging Shares Through a
Financial Intermediary

Redeeming or Exchanging Shares
by Telephone

Redeeming or Exchanging Shares by Mail

Requirements for Redemption

Requirements for Exchange

Systematic Withdrawal Program

Contingent Deferred Sales Charge

Eliminating the Contingent Deferred Sales Charge

Upon written notification to Federated Securities Corp. or the transfer agent,
no contingent deferred sales charge will be imposed on redemptions:

. following the death or disability, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, of the last surviving shareholder;
. representing minimum required distributions from an IRA or other retirement
plan to a shareholder who has attained the age of 70/1/2
. which are involuntary redemptions of shareholder accounts that do not comply
with the minimum balance requirements;
. which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program;
. which are reinvested in the Fund under the reinvestment privilege;
. 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 intermediary that sells Shares of the Fund pursuant to a sales
agreement with the distributor, and their immediate family members to the
extent that no payments were advanced for purchases made by these persons;
and
. of Shares originally purchased through a bank trust department, an investment
adviser registered under the Investment Advisers Act of 1940 or retirement
plans where the third party administrator has entered into certain
arrangements with Federated Securities Corp. or its affiliates, or any other
financial intermediary, to the extent that no payments were advanced for
purchases made through such entities.

ACCOUNT AND SHARE INFORMATION

Confirmations and Account Statements

Dividends and Distributions

Dividends are declared and paid annually to all shareholders invested in the
Fund on the record date. Net long-term capital gains realized by the Fund, if
any, will be distributed 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 without a sales charge, unless
shareholders request cash payments on the new account form or by contacting the
transfer agent.

Accounts with Low Balances

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

Advisory Fees

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.

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $120 billion invested across more
than 300 funds under management and/or administration by its subsidiaries, as
of December 31, 1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,000 financial
institutions nationwide.

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.

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 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 Wharton School of 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.

Distribution of Shares

The distributor may offer to pay financial institutions an amount equal to 1% of
the NAV 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 NAV of Class B
Shares purchased by their clients or customers. These payments will be made
directly by the distributor from its assets, and will not be made from the
assets of the Fund. Dealers may voluntarily waive receipt of all or any portion
of these payments. The distributor may pay a portion of the distribution fee
discussed below to financial institutions that waive all or any portion of the
advance payments.

Distribution Plan and Shareholder Services

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

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

Other Payments to Financial Institutions

Federated Securities Corp. will pay financial institutions, at the time of
purchase of Class A Shares, an amount equal to O.50% of the NAV of Class A
Shares purchased by their clients or customers under certain qualified
retirement plans as approved by Federated Securities Corp. (Such payments are
subject to a reclaim from the financial institution should the assets leave the
program within 12 months after purchase.)

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

Administration of the Fund

Administrative Services

Maximum Average Aggregate
Fee Daily Net Assets
<S> <C>
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

Brokerage Transactions

SHAREHOLDER INFORMATION

Directors may be removed by the Directors or 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.

As of January 7, 1998, the following shareholders of record owned 25% or more of
the outstanding shares of the Fund: Federated International Growth Fund,
Pittsburgh, Pennsylvania, owned approximately 528, 955 Class A Shares (56.26%)
and Merrill Lynch Pierce Fenner & Smith (as record owner holding Class C Shares
for its clients), Jacksonville, Florida, owned approximately 18,144 Class C
Shares (28.60%) 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.

TAX INFORMATION

Federal Income Tax

The Fund will pay no federal income tax because it expects to meet requirements
of the 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 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

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.

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.

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. Expense differences among Class A Shares, Class B
Shares, and Class C Shares may affect the performance of each class.

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

Class B Shares, and Class C Shares to certain indices.

APPENDIX

Standard and Poor's Ratings Services 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.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

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

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

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

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

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

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

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.

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

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

Ba--Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well assured. Of ten 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, L.P. 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

. 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 Services
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, L.P. 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.

[LOGO]FEDERATED INVESTORS

Federated Asia Pacific
Growth Fund

(A Portfolio of World Investment
Series, Inc.)
Class A Shares, Class B Shares,
Class C Shares

Prospectus
January 31, 1998
An Open-End, Diversified Management Investment Company

Federated Asia Pacific
Growth Fund
Class A Shares
Class B Shares
Class C Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Distributor
Federated Securities Corp.
Federated Investors Tower
100 Liberty Avenue
Pittsburgh, PA 15222-3779

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

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

Transfer Agent
and Dividend
Disbursing Agent
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

Independent Auditors
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

Federated Securities Corp., Distributor

1-800-341-7400

www.federatedinvestors.com

Cusip 981487507
Cusip 981487606 [LOGO]
Cusip 981487705 RECYCLED
G01470-02 (1/98) PAPER

Federated Asia Pacific Growth Fund
(A Portfolio of World Investment Series, Inc.)
Class A Shares
Class B Shares
Class C Shares

Statement of Additional Information

This Statement of Additional Information should be read with the prospectus for
Class A Shares, Class B Shares, and Class C Shares of Federated Asia Pacific
Growth Fund (the "Fund") dated January 31, 1998. This Statement is not a
prospectus itself. You may request a copy of either prospectus or a paper copy
of this Statement of Additional Information, if you have received it
electronically, free of charge by calling 1-800-341-7400.

Federated Asia Pacific Growth Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Statement dated January 31, 1998

[LOGO FEDERATED INVESTORS]

Federated Securities Corp., Distributor

Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800- 341-7400

www.federatedinvestors.com

Cusip 981487507
Cusip 981487606
Cusip 981487705
G01470-03 (1/98)

Table of Contents
- -----------------------------------------------------------
General Information About the Fund 1
Investment Objective and Policies 1
Convertible Securities 1
Investing in Securities of Other
Investment Companies 1
Warrants 1
Sovereign Debt Obligations 1
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Futures and Options 3
Risks 5
Foreign Currency Transactions 8
Special Considerations Affecting Asia and
the Pacific Rim 9
Special Considerations Affecting
Emerging Markets 10
Additional Risk Considerations 10
Portfolio Turnover 10
Investment Limitations 10
World Investment Series, Inc. Management 13
Fund Ownership 16
Directors Compensation 17
Investment Advisory Services 17
Adviser to the Fund 17
Advisory Fees 17
Other Related Services 18
Brokerage Transactions 18
Other Services 18
Fund Administration 18
Custodian and Portfolio Accountant 18
Transfer Agent 18
Independent Auditors 18
Purchasing Shares 19
Quantity Discounts and Accumulated Purchases 19
Concurrent Purchases 19
Letter of Intent 19
Reinvestment Privilege 19
Conversion of Class B Shares 20
Distribution Plan and Shareholder Services Agreement 20
Conversion to Federal Funds 20
Purchases by Sales Representatives, Fund
Directors, and Employees 20
Determining Net Asset Value 21
Determining Market Value of Securities 21
Trading in Foreign Securities 21
Redeeming Shares 21
Redemption in Kind 21
Contingent Deferred Sales Charge 22
Tax Status 22
The Fund's Tax Status 22
Foreign Taxes 22
Shareholders' Tax Status 22
Total Return 23
Yield 23
Performance Comparisons 23
Economic and Market Information 25
About Federated Investors 25
Mutual Fund Market 25
Institutional Clients 25
Bank Marketing 26
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 26
Financial Statements 26

General Information About the Fund
- -----------------------------------------------------------

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

Shares of the Fund are offered in three classes known as Class A Shares, Class B
Shares, and Class C Shares (individually and collectively referred to as
"Shares" as the context may require). This Statement of Additional Information
relates to all three classes of the above-mentioned Shares.

Investment Objective and Policies
- -----------------------------------------------------------

The investment objective of the Fund is to provide long-term growth of capital.
Any income realized from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in equity securities of Asian and
Pacific Rim companies. The investment objective cannot be changed without the
approval of shareholders.

Convertible Securities

Investing in Securities of Other Investment Companies

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

Warrants

The Fund may invest in warrants. Warrants are options to purchase common stock
at a specific price (usually at a premium above the market value of the optioned
common stock at issuance) valid for a specific period of time. Warrants may have
a life ranging from less than a year to twenty years or may be perpetual.
However, most warrants have expiration dates after which they are worthless. In
addition, if the market price of the common stock does not exceed the warrant's
exercise price during the life of the warrant, the warrant will expire as
worthless. Warrants have no voting rights, pay no dividends, and have no rights
with respect to the assets of the corporation issuing them. The percentage
increase or decrease in the market price of the warrant may tend to be greater
than the percentage increase or decrease in the market price of the optioned
common stock.

Sovereign Debt Obligations

The Fund may purchase sovereign debt instruments issued or guaranteed by foreign
governments or their agencies, including debt of countries with emerging markets
or developing countries. Sovereign debt may be in the form of conventional
securities or other types of debt instruments, such as loans or loan
participations. Sovereign debt of emerging market or developing countries may
involve a high degree of risk, and may be in default or present the risk of
default. Governmental entities responsible for repayment of the debt may be
unable or unwilling to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition, prospects for
repayment of principal and interest may depend on political as well as economic
factors. The Fund may also invest in debt obligations of supranational entities,
which include international organizations designed or supported by governmental
entities to promote economic reconstruction or development, and international
banking institutions and related government agencies. Examples of these include,
but are not limited to, the International Bank for Reconstruction and
Development (World Bank), European Investment Bank and Inter-American
Development Bank.

When-Issued and Delayed Delivery Transactions

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

Lending of Portfolio Securities

Repurchase Agreements

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

Reverse Repurchase Agreements

The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future, the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.

When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled.

Restricted and Illiquid Securities

The ability of the Directors to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC") staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933, as amended (the "Rule"). The Rule is a non-exclusive safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Directors. The
Directors may consider the following criteria in determining the liquidity of
certain restricted securities:

. the frequency of trades and quotes for the security;

. the number of dealers willing to purchase or sell the security and the
number of other potential buyers;

. dealer undertakings to make a market in the security; and

. the nature of the security and the nature of the marketplace trades.

Notwithstanding the foregoing, securities of foreign issuers which are not
listed on a recognized domestic or foreign exchange or for which a bona fide
market does not exist at the time of purchase or subsequent transaction shall be
treated as illiquid securities by the Directors.

Futures and Options

The Fund may attempt to hedge all or a portion of its portfolio or gain
relatively rapid, liquid, and cost-effective exposure to certain markets by
buying and selling futures contracts and options on futures contracts.

Futures Contracts

The Fund may engage in futures contracts. A futures contract is a firm
commitment by two parties, the seller who agrees to make delivery of the
specific type of security called for in the contract ("going short") and
the buyer who agrees to take delivery of the security ("going long") at a
certain time in the future. However, a securities index futures contract is
an agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to the difference between the value of the index
at the close of the last trading day of the contract and the price at which
the index was originally written. No physical delivery of the underlying
securities in the index is made.

The purpose of the acquisition or sale of a futures contract by the Fund is
to protect the Fund from fluctuations in the value of its securities caused
by unanticipated changes in interest rates or market conditions without
necessarily buying or selling the securities. For example, in the fixed
income securities market, price generally moves inversely to interest
rates. A rise in rates generally means a drop in price. Conversely, a drop
in rates generally means a rise in price. In order to hedge its holdings of
fixed income securities against a rise in market interest rates, the Fund
could enter into contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility that the
prices of its fixed income securities may decline during the anticipated
holding period. The Fund would "go long" (i.e., agree to purchase
securities in the future at a predetermined price) to hedge against a
decline in market interest rates. The Fund may also invest in securities
index futures contracts when the investment adviser believes such
investment is more efficient, liquid, or cost-effective than investing
directly in the securities underlying the index.

Stock Index Options

The Fund may purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter market. A stock
index fluctuates with changes in the market values of the stocks included
in the index.

The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in the Fund's portfolio correlate with
price movements of the stock index selected. Because the value of an index
option depends upon movements in the level of the index rather than the
price of a particular stock, whether the Fund will realize a gain or loss
from the purchase of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of
certain indices, in an industry or market segment, rather than movements in
the price of a particular stock. Accordingly, successful use by the Fund of
options on stock indices will be subject to the ability of the investment
adviser to predict correctly movements in the direction of the stock market
generally or of a particular industry.

Put Options on Financial Futures Contracts

The Fund may purchase listed or over-the-counter put options on financial
futures contracts. The Fund would use these options only to protect
portfolio securities against decreases in value resulting from market
factors such as anticipated increase in interest rates, or when the
investment adviser believes such investment is more efficient, liquid or
cost-effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are
unavailable for investment upon favorable terms.

Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified price,
the purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price. Generally, if the hedged
portfolio securities decrease in value during the term of an option, the
related futures contracts will also decrease in value and the option will
increase in value. In such an event, the Fund will normally close out its
option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be
large enough to offset both the premium paid by the Fund for the original
option plus the realized decrease in value of the hedged securities.

Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.

The Fund may write listed or over-the counter put options on financial
futures contracts to hedge its portfolio or when the investment adviser
believes such investment is more efficient, liquid or cost-effective than
investing directly in the futures contract or the underlying securities or
when such futures contracts or securities are unavailable for investment
upon favorable terms. When the Fund writes a put option on a futures
contract, it receives a cash premium which can be used in whatever way is
deemed most advantageous to the Fund. In exchange for such premium, the
Fund grants to the purchaser of the put the right to receive from the Fund,
at the strike price, a short position in such futures contract, even though
the strike price upon exercise of the option is greater than the value of
the futures position received by such holder. If the value of the
underlying futures position is not such that exercise of the option would
be profitable to the option holder, the option will generally expire
without being exercised. The Fund has no obligation to return premiums paid
to it whether or not the option is exercised. It will generally be the
policy of the Fund, in order to avoid the exercise of an option sold by it,
to cancel its obligation under the option by entering into a closing
purchase transaction, if available, unless it is determined to be in the
Fund's interest to deliver the underlying futures position. A closing
purchase transaction consists of the purchase by the Fund of an option
having the same term as the option sold by the Fund, and has the effect of
canceling the Fund's position as a seller. The premium which the Fund will
pay in executing a closing purchase transaction may be higher than the
premium received when the option was sold, depending in large part upon the
relative price of the underlying futures position at the time of each
transaction.

Call Options on Financial and Stock Index Futures Contracts

In addition to purchasing put options on futures, the Fund may write listed
call options or over-the-counter call options on financial and stock index
futures contracts (including cash-settled stock index options), to hedge
its portfolio against an increase in market interest rates, a decrease in
stock prices, or when the investment adviser believes such investment is
more efficient, liquid or cost-effective than investing directly in the
futures contract or the underlying securities or when such futures
contracts or securities are unavailable for investment upon favorable
terms. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position (selling a
futures contract) at the fixed strike price at any time during the life of
the option if the option is exercised. As stock prices fall or market
interest rates rise and cause the price of futures to decrease, the Fund's
obligation under a call option on a future (to sell a futures contract)
costs less to fulfill, causing the value of the Fund's call option position
to increase.

In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that
the Fund keeps the premium received for the option. This premium can
substantially offset the drop in value of the Fund's portfolio securities.

Prior to the expiration of a call written by the Fund, or exercise of it by
the buyer, the Fund may close out the option by buying an identical option.
If the hedge is successful, the cost of the second option will be less than
the premium received by the Fund for the initial option. The net premium
income of the Fund may then substantially offset the realized decrease in
value of the hedged securities.

The Fund generally will not maintain open positions in futures contracts it
has sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus the unrealized loss
or minus the unrealized gain on those open positions, adjusted for the
correlation between the hedged securities and the futures contracts. If
this limitation is exceeded at any time, the Fund will take prompt action
to close out a sufficient number of open contracts to bring its open
futures and options positions within this limitation.

"Margin" in Futures Transactions

Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from that of margin
in securities transactions in that initial margin in futures transactions
does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations
have been satisfied.

A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily change
in value of the futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or loan by the
Fund but is instead settlement between the Fund and the broker of the
amount one would owe the other if the futures contract expired. In
computing its daily net asset value, the Fund will mark to market its open
futures positions.

The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.

Purchasing Put and Call Options on Portfolio Securities

The Fund may purchase put and call options on portfolio securities to
protect against price movements in particular securities in its portfolio.
A put option gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during the
term of the option. A call option gives the Fund, in return for a premium,
the right to buy the underlying securities from the seller.

Writing Covered Put and Call Options on Portfolio Securities

The Fund may write covered put and call options to generate income and
thereby protect against price movements in particular securities in the
Fund's portfolio. As the writer of a call option, the Fund has the
obligation upon exercise of the option during the option period to deliver
the underlying security upon payment of the exercise price. As the writer
of a put option, the Fund has the obligation to purchase a security from
the purchaser of the option upon the exercise of the option.

The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment
of further consideration (or has segregated cash in the amount of any
additional consideration). In the case of put options, the Fund will
segregate cash or U.S. Treasury obligations with a value equal to or
greater than the exercise price of the underlying securities.

Over-the-Counter Options

The Fund may purchase and write over-the-counter options ("OTC options") on
portfolio securities or in securities indexes in negotiated transactions
with the buyers or writers of the options when options on the portfolio
securities held by the Fund or when the securities indexes are not traded
on an exchange.

OTC options are two-party contracts with price and terms negotiated between
buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are
purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while OTC options may not.

Risks

Options

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

Combined Transactions

The Fund may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transaction
(including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest
rate transactions ("component" transactions), instead of a single hedging
strategy, as part of a single or combined strategy when, in the opinion of
the investment adviser, it is in the best interests of the Fund to do so. A
combined transaction will usually contain elements of risk that are present
in each of its component transactions. Although combined transactions are
normally entered into based on the investment adviser's judgment that the
combined strategies will reduce risk or otherwise more effectively achieve
the desired portfolio management goal, it is possible that the combination
will instead increase such risks or hinder achievement of the portfolio
management objective.

Swaps, Caps, Floors and Collars

Among the hedging strategies into which the Fund may enter are interest
rate, currency and index swaps and the purchase or sale of related caps,
floors, and collars. The Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or
portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date. The
Fund intends to use these transactions as hedges and not as speculative
investments and will not sell interest rate caps or floors where it does
not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by
the Fund with another party of their respective commitments to pay or
receive interest, e.g., an exchange of floating rating payments of fixed
rate payments with respect to a notional amount of principal. A currency
swap is an agreement to exchange cash flows on a notional amount of two or
more currencies based on the relative value differential among them and an
index swap is an agreement to swap cash flows on a notional amount based on
changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount
from the party selling such cap to the extent that a specified index
exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount
from the party selling such floor to the extent that specified index falls
below a predetermined interest rate or amount. A collar is a combination of
a cap and a floor that preserves a certain return within a predetermined
range of interest rates or values.

The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as these
swaps, caps, floors, and collars are entered into for good faith hedging
purposes, the investment adviser and the Fund believe such obligations do
not constitute senior securities under the Investment Company Act of 1940
and, accordingly, will not treat them as being subject to its borrowing
restrictions. There is no minimal acceptable rating for a swap, cap, floor,
or collar to be purchased or held in the Fund's portfolio. If there is a
default by the counterparty, the Fund may have contractual remedies
pursuant to the agreements related to the transaction. The swap market has
grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

Risks of Hedging Strategies Outside the U.S.

When conducted outside the U.S., hedging strategies may not be regulated as
rigorously as in the U.S., may not involve a clearing mechanism and related
guarantees, and are subject to the risk of governmental actions affecting
trading in, or the prices of, foreign securities, currencies and other
instruments. The value of such positions also could be adversely affected
by: (i) other complex foreign political, legal and economic factors, (ii)
lesser availability than in the U.S. of data on which to make trading
decisions, (iii) delays in the Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures
and the margin requirements than in the U.S., and (v) lower trading volume
and liquidity.

Use of Segregated and Other Special Accounts

Many hedging strategies, in addition to other requirements, require that
the Fund segregate liquid high grade assets with its custodian to the
extent Fund obligations are not otherwise "covered" through ownership of
the underlying security, financial instrument or currency. In general,
either the full amount of any obligation by the Fund to pay or deliver
securities or assets must be covered at all times by the securities,
instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid high grade securities
at least equal to the current amount of the obligation must be segregated
with the custodian. The segregated assets cannot be sold or transferred
unless equivalent assets are substituted in their place or it is no longer
necessary to segregate them. For example, a call option written by the Fund
will require the Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate liquid high grade securities sufficient to
purchase and deliver the securities if the call is exercised. A call option
sold by the Fund on an index will require the Fund to own portfolio
securities which correlate with the index or to segregate liquid high grade
assets equal to the excess of the index value over the exercise price on a
current basis. A put option written by the Fund requires the Fund to
segregate liquid high grade assets equal to the exercise price.

Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, a currency
contract which obligates the Fund to buy or sell currency will generally
require the Fund to hold an amount of that currency or liquid securities
denominated in that currency equal to the Fund's obligations or to
segregate liquid high grade assets equal to the amount of the Fund's
obligations.

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OTC issued and exchange
listed index options, will generally provide for cash settlement. As a
result, when the Fund sells these instruments it will only segregate an
amount of assets equal to its accrued net obligations, as there is no
requirement for payment or delivery of amounts in excess of the net amount.
These amounts will equal 100% of the exercise price in the case of a non
cash-settled put, the same as an OTC guaranteed listed option sold by the
Fund, or the in-the-money amount plus any sell-back formula amount in the
case of a cash-settled put or call. In addition, when the Fund sells a call
option on an index at a time when the in-the-money amount exceeds the
exercise price, the Fund will segregate, until the option expires or is
closed out, cash or cash equivalents equal in value to such excess. OTC
issued and exchange listed options sold by the Fund other than those above
generally settle with physical delivery, and the Fund will segregate an
equal amount of assets equal to the full value of the option. OTC options
settling with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other options
settling with physical delivery.

In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possibly daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.

With respect to swaps, the Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap
on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps, floors and
collars require segregation of assets with a value equal to the Fund's net
obligation, if any.

Strategic transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated
assets, equals its net outstanding obligation in related options and
hedging strategies. For example, the Fund could purchase a put option if
the strike price of that option is the same or higher than the strike price
of a put option sold by the Fund. Moreover, instead of segregating assets
if the Fund held a futures or forward contract, it could purchase a put
option on the same futures or forward contract with a strike price as high
or higher than the price of the contract held. Other hedging strategies may
also be offset in combinations. If the offsetting transaction terminates at
the time of or after the primary transaction no segregation is required,
but if it terminates prior to such time, assets equal to any remaining
obligation would need to be segregated.

The Fund's activities involving hedging strategies may be limited by the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") for qualification as a regulated investment company.
(See "Tax Status")

Foreign Currency Transactions

Currency Risks

The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the Fund
values its assets daily in U.S. dollars, the Fund may not convert its
holdings of foreign currencies to U.S. dollars daily. The Fund may incur
conversion costs when it converts its holdings to another currency. Foreign
exchange dealers may realize a profit on the difference between the price
at which the Fund buys and sells currencies.

The Fund will engage in foreign currency exchange transactions in
connection with its portfolio investments. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market or
through forward contracts to purchase or sell foreign currencies.

Forward Foreign Currency Exchange Contracts

The Fund may enter into forward foreign currency exchange contracts in
order to protect against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and a foreign currency involved
in an underlying transaction. However, forward foreign currency exchange
contracts may limit potential gains which could result from a positive
change in such currency relationships. The investment adviser believes that
it is important to have the flexibility to enter into forward foreign
currency exchange contracts whenever it determines that it is in the Fund's
best interest to do so. The Fund will not speculate in foreign currency
exchange.

The Fund will not enter into forward foreign currency exchange contracts or
maintain a net exposure in such contracts when it would be obligated to
deliver an amount of foreign currency in excess of the value of its
portfolio securities or other assets denominated in that currency or, in
the case of a "cross-hedge" denominated in a currency or currencies that
the investment adviser believes will tend to be closely correlated with
that currency with regard to price movements. Generally, the Fund will not
enter into a forward foreign currency exchange contract with a term longer
than one year.

Foreign Currency Options

A foreign currency option provides the option buyer with the right to buy
or sell a stated amount of foreign currency at the exercise price on a
specified date or during the option period. The owner of a call option has
the right, but not the obligation, to buy the currency. Conversely, the
owner of a put option has the right, but not the obligation, to sell the
currency.

When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position during
the option period at any time prior to expiration.

A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally rises in value if the underlying currency depreciates in
value. Although purchasing a foreign currency option can protect the Fund
against an adverse movement in the value of a foreign currency, the option
will not limit the movement in the value of such currency. For example, if
the Fund was holding securities denominated in a foreign currency that was
appreciating and had purchased a foreign currency put to hedge against a
decline in the value of the currency, the Fund would not have to exercise
its put option. Likewise, if the Fund were to enter into a contract to
purchase a security denominated in foreign currency and, in conjunction
with that purchase, were to purchase a foreign currency call option to
hedge against a rise in value of the currency, and if the value of the
currency instead depreciated between the date of purchase and the
settlement date, the Fund would not have to exercise its call. Instead, the
Fund could acquire in the spot market the amount of foreign currency needed
for settlement.

Special Risks Associated with Foreign Currency Options

Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain risks
associated with foreign currency options. The markets in foreign currency
options are relatively new, and the Fund's ability to establish and close
out positions on such options is subject to the maintenance of a liquid
secondary market. Although the Fund will not purchase or write such options
unless and until, in the opinion of the investment adviser, the market for
them has developed sufficiently to ensure that the risks in connection with
such options are not greater than the risks in connection with the
underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time.

In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.

The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a
foreign security. Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those that may
be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally consisting
of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global, around-
the-clock market. To the extent that the U.S. option markets are closed
while the markets for the underlying currencies remain open, significant
price and rate movements may take place in the underlying markets that
cannot be reflected in the options markets until they reopen.

Foreign Currency Futures Transactions

By using foreign currency futures contracts and options on such contracts,
the Fund may be able to achieve many of the same objectives as it would
through the use of forward foreign currency exchange contracts. The Fund
may be able to achieve these objectives possibly more effectively and at a
lower cost by using futures transactions instead of forward foreign
currency exchange contracts.

Special Risks Associated with Foreign Currency Futures Contracts and Related
Options

Buyers and sellers of foreign currency futures contracts are subject to the
same risks that apply to the use of futures generally. In addition, there
are risks associated with foreign currency futures contracts and their use
as a hedging device similar to those associated with options on currencies,
as described above.

Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. To
reduce this risk, the Fund will not purchase or write options on foreign
currency futures contracts unless and until, in the opinion of the
investment adviser, the market for such options has developed sufficiently
that the risks in connection with such options are not greater than the
risks in connection with transactions in the underlying foreign currency
futures contracts. Compared to the purchase or sale of foreign currency
futures contracts, the purchase of call or put options on futures contracts
involves less potential risk to the Fund because the maximum amount at risk
is the premium paid for the option (plus transaction costs). However, there
may be circumstances when the purchase of a call or put option on a futures
contract would result in a loss, such as when there is no movement in the
price of the underlying currency or futures contract.

Special Considerations Affecting Asia and the Pacific Rim

Investment in securities of issuers domiciled in Japan and Hong Kong entails
special considerations. Overseas trade is important to Japan's economy. Japan
has few natural resources and must export to pay for its imports of these basic
requirements. Because of the concentration of Japanese exports in highly visible
products, Japan has had difficult relations with its trading partners,
particularly the U.S., where the trade imbalance is the greatest. It is possible
that trade sanctions or other protectionist measures could impact Japan
adversely in both the short and the long term. The Japanese securities markets
are less regulated than those in the United States. Evidence has emerged from
time to time of distortion of market prices to serve political or other
purposes. Shareholders' rights are not always equally enforced.

Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently, China has moved toward free enterprise, and has established stock
exchanges of its own.

Some Southeast Asian countries also may have managed currencies, which are not
free floating against the U.S. dollar. In addition, there is the risk that
certain Southeast Asian countries may restrict the free conversion of their
currencies into other currencies. Further, certain Southeast Asian currencies
may not be internationally traded. Any devaluations in currencies in which the
Fund's portfolio securities are denominated may have a detrimental impact on the
Fund's net asset value.

Special Considerations Affecting Emerging Markets

Investing in the securities of issuers domiciled in emerging markets, including
certain Asian markets such as Taiwan, Malaysia and Indonesia, may entail special
risks relating to the potential political and economic instability and the risks
of expropriation, nationalization, confiscation or the imposition of
restrictions on foreign investment, convertibility of currencies into U.S.
dollars and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, the Fund
could lose its entire investment in any such country.

Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading volume in issuers compared to
the volume of trading in U.S. securities could cause price to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities in these markets. In addition, securities
traded in certain emerging markets may be subject to risks due to the
inexperience of financial intermediaries, a lack of modern technology, the lack
of a sufficient capital base to expand business operations, and the possibility
of permanent or temporary termination of trading.

Settlement mechanisms in emerging securities markets may be less efficient and
less reliable than in more developed markets. In such emerging securities
markets there may be share registration and delivery delays or failures.

Additional Risk Considerations

The Directors consider at least annually the likelihood of the imposition by any
foreign government of exchange control restrictions which would affect the
liquidity of the Fund's assets maintained with custodians in foreign countries,
as well as the degree of risk from political acts of foreign governments to
which such assets may be exposed. The Directors also consider the degree of risk
involved through the holding of portfolio securities in domestic and foreign
securities depositories. However, in the absence of willful misfeasance, bad
faith or gross negligence on the part of the investment adviser, any losses
resulting from the holding of the Fund's portfolio securities in foreign
countries and/or with securities depositories will be at the risk of
shareholders. No assurance can be given that the Directors' appraisal of the
risks will always be correct or that such exchange control restrictions or
political acts of foreign governments might not occur.

Portfolio Turnover

The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. Portfolio securities will be sold when the
Adviser believes it is appropriate, regardless of how long those securities have
been held. For the fiscal year ended November 30, 1997, and for the period from
February 28, 1996 (date of initial public investment) to November 30, 1996, the
Fund's portfolio turnover rates were 193% and 99%, respectively.

Investment Limitations

The following investment limitations are fundamental (except that no investment
limitation of the Fund shall prevent the Fund from investing substantially all
of its assets (except for assets which are not considered "investment
securities" under the Investment Company Act of 1940 or assets exempted by the
SEC) in an open-end investment company with substantially the same investment
objectives):

Selling Short and Buying on Margin

The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as are necessary for the
clearance of purchases and sales of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not
considered the purchase of a security on margin.

Issuing Senior Securities and Borrowing Money

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

Pledging Assets

The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In these cases, the Fund may pledge assets as
necessary to secure such borrowings. For purposes of this limitation, the
following will not be deemed to be pledges of the Fund's assets: (a) the
deposit of assets in escrow in connection with the writing of covered put
or call options and the purchase of securities on a when-issued basis; and
(b) collateral arrangements with respect to: (i) the purchase and sale of
securities options (and options on securities indexes) and (ii) initial or
variation margin for futures contracts.

Concentration of Investments

The Fund will not invest 25% or more of the value of its total assets in
any one industry, except that the Fund may invest 25% or more of the value
of its total assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities.

Investing in Commodities

The Fund will not invest in commodities, except that the Fund reserves the
right to engage in transactions involving futures contracts, options, and
forward contracts with respect to securities, securities indexes or
currencies.

Investing in Real Estate

The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the securities of
companies whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.

Lending Cash or Securities

The Fund will not lend any of its assets, except portfolio securities. This
shall not prevent the Fund from purchasing or holding U.S. government
obligations, corporate bonds, money market instruments, debentures, notes,
certificates of indebtedness, or other debt securities, entering into
repurchase agreements, or engaging in other transactions where permitted by
the Fund's investment objective, policies, and limitations or the
Corporation's Articles of Incorporation.

Underwriting

The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.

Diversification of Investments

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

The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval (except that no investment
limitation of the Fund shall prevent the Fund from investing substantially
all of its assets (except for assets which are not considered "investment
securities" under the Investment Company Act of 1940 or assets exempted by
the SEC) in an open-end investment company with substantially the same
investment objectives). Shareholders will be notified before any material
changes in these limitations become effective.

Investing in Illiquid Securities

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, non-negotiable time
deposits with maturities over seven days, over-the-counter options, swap
agreements not determined to be liquid, and certain restricted securities
not determined by the Directors to be liquid.

Purchasing Securities to Exercise Control

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

Investing in Put Options

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

Writing Covered Call Options

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

Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.

The Fund has no present intent to borrow money, pledge securities, or
invest in reverse repurchase agreements in excess of 5% of the value of its
total assets in the coming fiscal year. In addition, the Fund expects to
lend not more than 5% of its total assets in the coming fiscal year.

For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be "cash items."

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

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

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

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
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Director

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

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

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Director

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

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

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

Richard B. Fisher*
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Director and President

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

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.

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

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; Director or Trustee of the Funds.
- --------------------------------------------------------------------------------

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Director

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

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Director

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

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

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President

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

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

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

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

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

* 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; 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 Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; 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; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.

Fund Ownership

As of January 7, 1998, Officers and Directors as a group own less than 1% of the
Fund's outstanding shares.

As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding voting stock of the Fund's Class A Shares: Federated
International Growth Fund, Pittsburgh, Pennsylvania, owned approximately 528,955
shares (56.26%).

As of January 7, 1998, the following shareholder of record owned 5% or more of
the outstanding voting stock of the Fund's Class B Shares: Merrill Lynch Pierce
Fenner & Smith, Jacksonville, Florida, for the sole benefit of its customers,
owned approximately 41,562 shares (9.11%).

As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding voting stock of the Fund's Class C Shares: Merrill Lynch Pierce
Fenner & Smith, Jacksonville, Florida, for the sole benefit of its customers,
owned approximately 18,144 shares (28.60%) and Bear Stearns Securities, Corp.,
Brooklyn, New York, owned approximately 10,875 shares (17.14%).

<TABLE>
<CAPTION>
Directors Compensation
- -----------------------------------------------------------------------------------

AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
- ------------------------------------------------------------------------------------
<S> <C> <C>
John F. Donahue $ -0- $-0- for the Corporation and
Chairman and Director 56 investment companies in the Fund Complex
Thomas G. Bigley $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
John T. Conroy, Jr. $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex
William J. Copeland $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex
James E. Dowd $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
Richard B. Fisher $ -0- $-0- for the Corporation and
President and Director 6 investment companies in the Fund Complex
Edward L. Flaherty, Jr. $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex
Peter E. Madden $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
John E. Murray, Jr. $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
Wesley W. Posvar $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
Marjorie P. Smuts $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
- ------------------------------------------------------------------------------------
</TABLE>

* Information is furnished for the fiscal year ended November 30, 1997.

# The aggregate compensation is provided for the Corporation, which is
comprised of 8 portfolios.

+ The information is provided for the last calendar year end.

Investment Advisory Services
- --------------------------------------------------------------------------------
Adviser to the Fund

The Fund's investment adviser is Federated Global Research Corp. (the
"Adviser"). It is a subsidiary of Federated Investors. All the voting securities
of Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue.

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

Advisory Fees

For its advisory services, the Adviser receives an annual investment advisory
fee as described in each prospectus. For fiscal year ended November 30, 1997 and
for the period from February 28, 1996 (date of initial public investment) to
November 30, 1996, the Adviser earned $100,152 and $48,769, respectively, all of
which were voluntarily waived.

Other Related Services

Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.

Brokerage Transactions

The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
For the fiscal year ended November 30, 1997 and for the period from February 28,
1996 (date of initial public investment) to November 30, 1996, the Fund paid
$200,241 and $69,033, respectively, in brokerage commissions.

The Adviser may engage in other non-U.S. transactions that may have adverse
effects on the market for securities in the Fund's portfolio. The Adviser is not
obligated to obtain any material non-public ("inside") information about any
securities issuer, or to base purchase or sale recommendations on such
information.

Other Services
- --------------------------------------------------------------------------------
Fund Administration

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in each
prospectus. From January 31, 1996 to March 1, 1996, Federated Administrative
Services, also a subsidiary of Federated Investors, served as the Fund's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal year ended
November 30, 1997 and for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996, the Administrators earned $185,000 and
$141,023, 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 upon 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 prospectus, Shares are sold
at their net asset value (plus a sales charge on Class A Shares only) on days
the New York Stock Exchange is open for business. The procedure for purchasing
Shares is explained in the prospectus under "Investing in the Fund" and
"Purchasing Shares." For further information on any of the programs listed below
please contact your financial intermediary or Federated Securities Corp.

Quantity Discounts and Accumulated Purchases

As described in the prospectus, larger purchases of the same Share class reduce
the sales charge paid. For example, the Fund will combine all Class A Shares
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, if applicable, is reduced for purchases made at one
time by a trustee or fiduciary for a single trust estate or a single fiduciary
account.

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

Concurrent Purchases

Shareholders have the privilege of combining concurrent purchases of the same
Share class of two or more funds in the Federated Complex in calculating the
applicable sales charge.

Letter of Intent

A Shareholder can sign a letter of intent committing to purchase a certain
amount of the same Share class within a 13 month period in order to combine such
purchases in calculating the applicable sales charge. The Fund's custodian will
hold Shares in escrow equal to the maximum applicable sales charge. If the
shareholder completes the commitment, the escrowed Shares will be released to
their account. If the commitment is not completed within 13 months, the
custodian will redeem an appropriate number of escrowed Shares to pay for the
applicable sales charge.

While this letter of intent will not obligate the shareholder to purchase Class
A Shares, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. At the time a letter of intent is
established, current balances in accounts in any Class A Shares of any Federated
Funds, excluding money market accounts, will be aggregated to provide a purchase
credit towards fulfillment of the letter of intent. The letter may be dated as
of a prior date to include any purchase made within the past 90 days. Prior
trade prices will not be adjusted.

Reinvestment Privilege

The reinvestment privilege is available for all Shares of the Fund within the
same Share Class.

Class A shareholders who redeem from the Fund may reinvest the redemption
proceeds back into the same Share class at the next determined net asset value
without any sales charge. The original shares must have been subject to a sales
charge and the reinvestment must be within 120 days.

Similarly, Class C shareholders who redeem may reinvest their redemption
proceeds in the same Share class within 120 days. Class B Shares also may be
reinvested within 120 days of redemption, although such reinvestment will be
made into Class A Shares. Shareholders would not be entitled to a reimbursement
of the contingent deferred sales charge if paid at the time of redemption on any
Share class. However, reinvested shares would not be subject to a contingent
deferred sales charge, if otherwise applicable, upon later redemption.

Conversion of Class B Shares

Distribution Plan and Shareholder Services Agreement

These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services as appropriate, 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, the Directors expect that the Class A Shares,
Class B Shares, and Class C Shares of the Fund will be able to achieve a more
predictable flow of cash for investment purposes and to meet redemptions. This
will facilitate more efficient portfolio management and assist the Fund in
pursuing its investment objectives. By identifying potential investors whose
needs are served by the Fund's objectives, and properly servicing these
accounts, it may be possible to curb sharp fluctuations in rates of redemptions
and sales.

For the fiscal year ended November 30, 1997, the Fund's Class B Shares and Class
C Shares paid $25,716 and $3,848, respectively, in distribution services fees,
none of which was waived. Class A Shares have no present intention of paying or
accruing distribution services fees during the fiscal year ending November 30,
1998. In addition, for the fiscal year ended November 30, 1997, the Fund's Class
A Shares, Class B Shares and Class C Shares paid shareholder services fees in
the amounts of $12,907, $8,572 and $1,282, respectively, none of which was
waived.

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

The following individuals and their immediate family members may buy Class A
Shares at net asset value without a sales charge:

. Directors, employees, and sales representatives of the Fund, Federated
Global Research, and Federated Securities Corp. and its affiliates;

. Federated Life Members (Class A Shares only);

. any associated person of an investment dealer who has a sales agreement with
Federated Securities Corp.; and

. trusts, pensions, or profit-sharing plans for these individuals.

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

Determining Net Asset Value
- --------------------------------------------------------------------------------

Determining Market Value of Securities

Market values of the Fund's portfolio securities, other than options, are
determined as follows:

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

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

. for bonds and other fixed income securities, as determined by an independent
pricing service;

. for short-term obligations, according to the prices as furnished by an
independent pricing service, except that short-term obligations with
remaining maturities of less than 60 days at the time of purchase may be
valued at amortized cost; and

. for all other securities, at fair value as determined in good faith by the
Directors.

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

The Fund will value futures contracts and options at their market values
established by the exchanges on which they are traded at the close of trading on
such exchanges unless the Directors determine in good faith that another method
of valuing such investments is necessary.

Trading in Foreign Securities

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
prospectus under "Redeeming and Exchanging 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.

Redemption in Kind

The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund 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.

Contingent Deferred Sales Charge

Elimination of the Contingent Deferred Sales Charge -- Class B Shares

Tax Status
- --------------------------------------------------------------------------------
The Fund's Tax Status

The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:

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

. invest in securities within certain statutory limits; and

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

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

Foreign Taxes

Investment income on certain foreign securities in which the Fund may invest may
be subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject.

Shareholders' Tax Status

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

Capital Gains

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

Total Return
- --------------------------------------------------------------------------------

The Fund's average annual total returns based on offering price for the
following periods ended November 30, 1997were:

<TABLE>
<CAPTION>
Share Class Inception Date One-Year Since Inception
<S> <C> <C> <C>
Class A 2/28/96 (28.02%) (15.85%)
Class B 2/28/96 (28.36%) (15.99%)
Class C 2/28/96 (24.90%) (13.55%)
</TABLE>

Any applicable contingent deferred sales charge is deducted from the ending
value of the investments based on the lesser of the original purchase price or
the offering price of Shares redeemed.

Yield
- --------------------------------------------------------------------------------

The yield for all classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the SEC) earned by any class of
Shares over a thirty-day period by the maximum offering price per Share of any
class of Shares 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
twelve-month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by any class of Shares because of
certain adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

Performance Comparisons
- --------------------------------------------------------------------------------
The performance of each of the classes of Shares depends upon such variables as:

. portfolio quality;

. average portfolio maturity;

. type of instruments in which the portfolio is invested;

. changes in interest rates and market value of portfolio securities;

. changes in the Fund's or any class of Shares' expenses; and

. various other factors.

The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per Share fluctuate daily. Both net earnings and offering
price 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:

. Standard & Poor's Daily Stock Price Index of 500 Common Stocks (S&P 500), a
composite index of common stocks in industry, transportation, and financial
and public utility companies, can be used to compare to the total returns of
funds whose portfolios are invested primarily in common stocks. In addition,
the S & P 500 assumes reinvestments of all dividends paid by stocks listed on
its index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in the Standard & Poor's figures.

. Lipper Analytical Services, Inc., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and
takes into account any change in net asset value over a specified period of
time. From time to time, the Fund will quote its Lipper ranking in the
"pacific region funds" category in advertising and sales literature.

. Morgan Stanley Capital International World Indices, including, among others,
the Morgan Stanley Capital International Europe, Australia, Far East Index
("EAFE Index"). The EAFE Index is an unmanaged index of more than 1,000
companies of Europe, Australia, and the Far East.

. Ibbotson Associates International Bond Index, which provides a detailed
breakdown of local market and currency returns since 1960.

. Bear Stearns Foreign Bond Index, which provides simple average returns for
individual countries and GNP-weighted index, beginning in 1975. The returns
are broken down by local market and currency.

. Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

. Data and mutual fund rankings published or prepared by CDA/Wiesenberger
Investment Company Services that ranks and/or compares mutual funds by
overall performance, investment objectives, assets, expense levels, periods
of existence and/or other factors.

. Financial Times Actuaries Indices -- including the FTA-World Index (and
components thereof), which are based on stocks in major world equity markets.

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

. Dow Jones Industrial Average ("DJIA") represents share prices of selected
blue-chip industrial corporations. The DJIA indicates daily changes in the
average price of stock of these corporations. Because it represents the top
corporations of America, the DJIA index is a leading economic indicator for
the stock market as a whole.

. CNBC/Financial News Composite Index.

. The World Bank Publication of Trends in Developing Countries (TIDE). TIDE
provides brief reports on most of the World Bank's borrowing members. The
World Development Report is published annually and looks at global and
regional economic trends and their implications for the developing economies.

. Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.

. Datastream, InterSec, FactSet, Ibbotson Associates, and Worldscope are
database retrieval services for information including, but not limited to,
international financial and economic data.

. International Financial Statistics, which is produced by the International
Monetary Fund.

. Various publications and annual reports produced by the World Bank and its
affiliates.

. Various publications from the International Bank for Reconstruction and
Development.

. Various publications including, but not limited to, ratings agencies such as
Moody's Investors Service, Inc., Fitch Investors Service, Inc. and Standard &
Poor's Ratings Group.

. Wilshire Associates, which is an on-line database for international financial
and economic data including performance measures for a wide range of
securities.

. International Finance Corporation (IFC) Emerging Markets Data Base, which
provides detailed statistics on stock and bond markets in developing
countries, including IFC market indices.

. Various publications from the Organization for Economic Cooperation and
Development (OECD).

From time to time, the Fund may quote information including but not limited to
data regarding: individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources deemed reliable.

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

From time to time as it deems appropriate, the Fund may advertise the
performance of any class of Shares using charts, graphs, and descriptions,
compared to federally insured bank products including certificates of deposit
and time deposits and to money market funds using the Lipper Analytical Services
money market instruments average. In addition, advertising and sales literature
for the Fund may use charts and graphs to illustrate the principles of
dollar-cost averaging and may disclose the amount of dividends paid by the Fund
over certain periods of time.

Advertisements may quote performance information which does not reflect the
effect of the sales charge on

Class A Shares.

Economic and Market Information

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.

Mutual Fund Market

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

Institutional Clients

* Source: Investment Company Institute

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.

Financial Statements
- --------------------------------------------------------------------------------

FEDERATED EMERGING MARKETS FUND

(A Portfolio of World Investment Series, Inc.)
Class A Shares, Class B Shares, Class C Shares

PROSPECTUS

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

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

The Fund has also filed a Statement of Additional Information dated January 31,
1998, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. 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, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary of Fund Expenses............................. 1
Financial Highlights--Class A Shares................. 2
Financial Highlights--Class B Shares................. 3
Financial Highlights--Class C Shares................. 4
General Information.................................. 5
Calling the Fund.................................... 5
Investment Information............................... 5
Investment Objective................................ 5
Investment Policies................................. 5
Portfolio Turnover.................................. 13
Investment Limitations.............................. 13
Net Asset Value...................................... 13
Investing in the Fund................................ 14
Purchasing Shares.................................... 14
Purchasing Shares Through a Financial Intermediary.. 14
Purchasing Shares by Wire........................... 15
Purchasing Shares by Check.......................... 15
Systematic Investment Program....................... 15
Retirement Plans.................................... 15
Class A Shares...................................... 15
Class B Shares...................................... 15
Class C Shares...................................... 16
Redeeming and Exchanging Shares...................... 16
Redeeming or Exchanging Shares Through a
Financial Intermediary............................. 16
Redeeming or Exchanging Shares by Telephone......... 16
Redeeming or Exchanging Shares by Mail.............. 16
Requirements for Redemption......................... 17
Requirements for Exchange........................... 17
Systematic Withdrawal Program....................... 17
Contingent Deferred Sales Charge.................... 17
Account and Share Information........................ 18
Confirmations and Account Statements................ 18
Dividends and Distributions......................... 18
Accounts with Low Balances.......................... 18
Corporation Information.............................. 18
Management of the Corporation....................... 18
Distribution of Shares.............................. 19
Administration of the Fund.......................... 20
Brokerage Transactions.............................. 20
Shareholder Information.............................. 21
Tax Information...................................... 21
Federal Income Tax................................... 21
State and Local Taxes............................... 22
Performance Information.............................. 22
Appendix............................................. 22
</TABLE>

SUMMARY OF FUND EXPENSES

Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)... 5.50% None None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage
of offering price)............................................................. None None None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)................................... None 5.50%(1) 1.00%(2)
Redemption Fee (as a percentage of amount redeemed, if applicable).............. None None None
Exchange Fee.................................................................... None None None
</TABLE>
Annual Operating Expenses
(As a percentage of average net assets)*
<TABLE>
<S> <C> <C> <C>
Management Fee............. 1.25% 1.25% 1.25%
12b-1 Fee.................. 0.00%(3) 0.75% 0.75%
Total Other Expenses....... 1.31% 1.31% 1.31%
Shareholder Services Fee... 0.25% 0.25% 0.25%
Total Operating Expense.... 2.56%(4) 3.31%(5)(6) 3.31%(6)
</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. For a more complete
description, see "Contingent Deferred Sales Charge."
(2) 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) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1998. 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. For a more complete
description, see "Corporation Information."

(4) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1998. The total
operating expenses were 2.14% for the fiscal year ended November 30, 1997
and would have been 2.79% absent the voluntary waiver of a portion of the
management fee.
(5) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

(6) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1998. The total
operating expenses were 2.89% for the fiscal year ended November 30, 1997
and would have been 3.54% absent the voluntary waiver of a portion of the
management fee.
. The total operating expenses are estimated based on average expenses
expected to be incurred during the period ending November 30, 1998. During
the course of this period, expenses may be more or less than the average
amount shown.

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Class A Shares, Class B Shares, or
Class C Shares the Fund will bear, either directly or indirectly. For more
complete descriptions of the various costs and expenses, see "Purchasing Shares"
and "Corporation Information." Wire-transferred redemptions of less than $5,000
may be subject to additional fees.

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

<TABLE>
<CAPTION>
Example Class A Class B Class C
<S> <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.
1 Year........................................................................................ $ 79 $ 89 $ 44
3 Years....................................................................................... $130 $144 $102
5 Years....................................................................................... $184 $194 $173
10 Years...................................................................................... $329 $342 $360
You would pay the following expenses on the same investment, assuming no redemption.
1 Year........................................................................................ $ 33 $ 33
3 Years....................................................................................... $102 $102
5 Years....................................................................................... $173 $173
10 Years...................................................................................... $342 $360
</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

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 11.10 $ 10.00
Income from investment operations
Net investment income 0.01 0.02
Net realized and unrealized gain on investments and foreign currency 0.53(e) 1.08
Total from investment operations 0.54 1.10
Net asset value, end of period $ 11.64 $ 11.10
Total return(b) 4.86% 11.00%
Ratios to average net assets
Expenses 2.14% 1.97%*
Net investment income 0.13% 0.31%*
Expense waiver/reimbursement(C) 0.65% 3.34%*
Supplemental data
Net assets, end of period (000 omitted) $48,525 $17,327
Average commission rate paid(d) $0.0006 $0.0029
Portfolio turnover 102% 32%
</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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

(e) The amount shown in this caption for a share outstanding does not correspond
with the aggregate net realized and unrealized gain (loss) on investments
and foreign currency for the period ended due to the timing of sales and
repurchases of Fund shares in relation to fluctuating market values of the
investments of the Fund.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF
CHARGE.

FINANCIAL HIGHLIGHTS--CLASS B SHARES

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 11.04 $ 10.00
Income from investment operations
Net operating loss (0.04) (0.02)
Net realized and unrealized gain on investments and foreign currency 0.50(e) 1.06
Total from investment operations 0.46 1.04
Net asset value, end of period $ 11.50 $ 11.04
Total return(b) 4.17% 10.40%
Ratios to average net assets
Expenses 2.89% 2.72%*
Net operating loss (0.69%) (0.71%)*
Expense waiver/reimbursement(C) 0.65% 3.34%*
Supplemental data
Net assets, end of period (000 omitted) $19,951 $ 3,747
Average commission rate paid(d) $0.0006 $ 0.0029
Portfolio turnover 102% 32%
</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.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF
CHARGE.

FINANCIAL HIGHLIGHTS--CLASS C SHARES

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 11.05 $ 10.00
Income from investment operations
Net operating loss (0.04) (0.02)
Net realized and unrealized gain on investments and foreign currency 0.49(e) 1.07
Total from investment operations 0.45 1.05
Net asset value, end of period $ 11.50 $ 11.05
Total return(b) 4.07% 10.50%
Ratios to average net assets
Expenses 2.89% 2.72%*
Net operating loss (0.65%) (0.77%)*
Expense waiver/reimbursement(C) 0.65% 3.34%*
Supplemental data
Net assets, end of period (000 omitted) $ 3,943 $ 847
Average commission rate paid(d) $0.0006 $ 0.0029
Portfolio turnover 102% 32%
</TABLE>

. Computed on an annualized basis.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF
CHARGE.

GENERAL INFORMATION

The Corporation was incorporated under the laws of the state of Maryland on
January 25, 1994. Class A Shares, Class B Shares, and Class C Shares of the Fund
("Shares") are designed for individuals and institutions seeking long-term
growth of capital by investing primarily in a portfolio of common stocks of
emerging market countries.

The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

Calling the Fund Call the Fund at 1-800-341-7400.

INVESTMENT INFORMATION

Investment Objective

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

Investment Policies

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

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

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

Emerging Markets

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

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

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

Acceptable Investments

Common and Preferred Stock

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

Depositary Receipts

The Fund may invest in foreign issuers by purchasing sponsored or unsponsored
securities representing underlying international securities such as American
Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"), European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"), Global
Depositary Certificates ("GDCs"), International Depositary Receipts ("IDRs"),
and Russian Depositary Certificates ("RDCs") 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, IDRs and RDCs 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, IDRs, and RDCs are collectively known as "Depositary
Receipts." Depositary Receipts may be available for investment through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the security underlying the receipt and a depositary,
whereas an unsponsored facility may be established by a depositary without
participation by the issuer of the receipt's underlying security. Holders of an
unsponsored Depositary Receipt generally bear all the costs of the unsponsored
facility. The depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through to the holders of the receipts voting
rights with respect to the deposited securities.

Debt Securities

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

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

Convertible Securities

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as DECS--
(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS--(Liquid Yield Option Notes, which are
corporate bonds that are purchased at prices below par with no coupons and are
convertible into stock), PERCS--Preferred Equity Redemption Cumulative Stock (an
equity issue that pays a high cash dividend, has a cap price and mandatory
conversion to common stock at maturity), and PRIDES--(Preferred Redeemable
Increased Dividend Securities, which are essentially the same as DECS; the
difference is little more than who initially underwrites the issue).

Investing in Securities of Other Investment Companies

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 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 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

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
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

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

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

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

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

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

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

Risk Characteristics of Foreign Securities

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

Currency Risks

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

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

. 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 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

Risk Considerations in Emerging Markets

Investing in securities of issuers in emerging market countries involves
exposure to significantly higher risk than investing in countries with developed
markets. Emerging market countries may have economic structures that are
generally less diverse and mature and political systems that can be expected to
be less stable than those of developed countries.

Securities prices in emerging market countries can be significantly more
volatile than in developed countries, reflecting the greater uncertainties of
investing in lesser developed markets and economies. In particular, emerging
market countries may have relatively unstable governments, and may present the
risk of nationalization of businesses, expropriation, confiscatory taxation or,
in certain instances, reversion to closed market, centrally planned economies.
Such countries may also have restrictions on foreign ownership or prohibitions
on the repatriation of assets, and may have less protection of property rights
than developed countries.

The economies of emerging market countries may be predominantly based on only a
few industries or dependent on revenues from particular commodities or on
international aid or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from extreme and volatile
debt burdens or inflation rates. In addition, securities markets in emerging
market countries may trade a small number of securities and may be unable to
respond effectively to increases in trading volume, potentially resulting in a
lack of liquidity and in volatility in the price of securities traded on those
markets. Also, securities markets in emerging market countries typically offer
less regulatory protection for investors.

Risk Factors Relating to Investing in
High Yield Securities

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.

Portfolio Turnover

The Fund does not attempt to set or meet any specific portfolio turnover rate,
since turnover is incidental to transactions under-taken in an attempt to
achieve the Fund's investment objective. High turnover rates may result in
higher brokerage commissions and capital gains. See "Tax Information" in this
prospectus.

Investment Limitations
The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The NAV is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m. Eastern time) every day the New York Stock Exchange is open.

INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the characteristics
described below.

<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Minimum and
Subsequent
Investment Amounts $1500/$100 $1500/$100 $1500/$100
Minimum and Subsequent
Investment Amount for
Retirement Plans $ 250/$100 $ 250/$100 $ 250/$100
Maximum Sales Charge 5.50%* None None
Maximum Contingent
Deferred Sales Charge** None 5.50%+ 1.00%#
Conversion Feature No Yes++ No
</TABLE>

. Class A Shares are sold at NAV, plus a sales charge as follows:

** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption.
+ The following contingent deferred sales charge schedule applies to Class B
Shares:

Year of Redemption Contingent 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 B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase. See "Conversion of Class B
Shares."
# The contingent deferred sales charge is assessed on Shares redeemed within
one year of their purchase date.

PURCHASING SHARES

In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor.

Purchasing Shares Through a Financial Intermediary

Purchasing Shares by Wire

Shares may be purchased by Federal Reserve wire by calling the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Shareholder Services Company, c/o State Street
Bank and Trust Company, Boston, MA 02266-8600; Attention: EDGEWIRE; For Credit
to: (Fund Name) (Fund Class); (Fund Number--this number can be found on the
account statement or by contacting the Fund); 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.

Purchasing Shares by Check

Systematic Investment Program

Retirement Plans
Fund Shares can be purchased as an investment for retirement plans or Individual
Retirement Accounts ("IRA"). For further details, contact the Fund and consult a
tax adviser.

Class A Shares
Class A Shares are sold at NAV, plus a sales charge. However:

No sales charge is imposed for Class A Shares purchased:

. through financial intermediaries that do not receive sales charge dealer
concessions;

. by Federated Life Members; or

. through "wrap accounts" or similar programs under which clients pay a fee for
services.

In addition, the sales charge can be reduced or eliminated by:

. purchasing in quantity and accumulating purchases at the levels in the table
under "Investing in the Fund";

. combining concurrent purchases of two or more funds;

. signing a letter of intent to purchase a specific quantity of shares within
13 months; or

. using the reinvestment privilege.

Dealer Concession

Class B Shares

Conversion of Class B Shares

Class C Shares
Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00% will
be charged on assets redeemed within the first full 12 months following
purchase.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Shares of the same
class of other Federated Funds on days on which the Fund computes its NAV.
Shares are redeemed at NAV less any applicable contingent deferred sales charge.
However, in order to protect shareholders of the Fund from possible detrimental
effects of redemptions, the Adviser may cause a delay of two to seven days in
sending redemption proceeds during certain periods of market volatility or for
certain shareholders. Exchanges are made at NAV. Shareholders who desire to
automatically exchange Shares, of a like class, in a pre-determined amount on a
monthly, quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.

Redeeming or Exchanging Shares
Through a Financial Intermediary

Redeeming or Exchanging Shares by Telephone

Redeeming or Exchanging Shares by Mail

Requirements for Redemption

Requirements for Exchange

Systematic Withdrawal Program

Contingent Deferred Sales Charge

Eliminating the Contingent Deferred Sales Charge
Upon written notification to Federated Securities Corp. or the transfer agent,
no contingent deferred sales charge will be imposed on redemptions:

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

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

. which are involuntary redemptions of shareholder accounts that do not comply
with the minimum balance requirements;

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

. which are reinvested in the Fund under the reinvestment privilege;

ACCOUNT AND SHARE INFORMATION

Confirmations and Account Statements

Dividends and Distributions

Accounts with Low Balances

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

Advisory Fees

The Adviser receives an annual investment advisory fee equal to 1.25% 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.

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $120 billion invested across more
than 300 funds under management and/or administration by its subsidiaries, as
of December 31, 1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients.

Jolanta M. Wysocka has been the Fund's portfolio manager since February 1996.
Ms. Wysocka joined Federated Investors in 1995 as a Vice President of the
Fund's investment adviser. Ms. Wysocka served as Senior Investment Officer and
Emerging Markets Portfolio Manager at PIMCO Advisers L.P./Parametric Portfolio
Associates from 1993 to 1995. She served as President of Kinetic Capital
Management, Inc. from 1991 to 1995. Ms. Wysocka received her master's degree in
computer science from the Institute of Technology, Zielona Gora, Poland.

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

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25% of the average daily NAV 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.

Other Payments to Financial Institutions

Furthermore, with respect to Class A Shares, Class B Shares, and Class C Shares,
Federated Securities Corp. and Federated Shareholder Services may offer to pay a
fee from their own assets to financial institutions as financial assistance for
providing substantial 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 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:

Brokerage Transactions

SHAREHOLDER INFORMATION

Directors may be removed by the Directors or 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.

As of January 7, 1998, the following shareholder of record owned 25% or more of
the outstanding Class C Shares of the Fund: Merrill Lynch Pierce Fenner & Smith
(as record owner holding Class C Shares for its clients), Jacksonville, Florida,
owned approximately 81,520 Class C Shares (28.40%) 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.

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.

State and Local Taxes

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.

APPENDIX

Standard and Poor's Ratings Services
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.

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.

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

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

Moody's Investors Service, Inc.
Long-Term Bond Rating Definitions

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

AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.

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. Of ten the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

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

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

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

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

Fitch Investors Service, L.P.
Long-Term Debt Rating Definitions

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.

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

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

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

Moody's Investors Service, Inc.
Commercial Paper Ratings

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

. Leading market positions in well established industries.

. High rates of return on funds employed.

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

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

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

Prime-2--Issuers rated PRIME-1 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

Standard and Poor's Ratings Services Commercial Paper Ratings

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

Fitch Investors Service, L.P.
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.

NOTES

[LOGO] FEDERATED INVESTORS

FEDERATED EMERGING
MARKETS

(A Portfolio of World Investment
Series, Inc.)

Class A Shares, Class B Shares,
Class C Shares

PROSPECTUS
JANUARY 31, 1998

An Open-End, Diversified Management
Investment Company

FEDERATED EMERGING
MARKETS FUND

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

Federated Investors Funds

5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

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

TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

Federated Securities Corp., Distributor

1-800-341-7400

www.federatedinvestors.com

Cusip 981487804
Cusip 981487887 [LOGO]
Cusip 981487879 RECYCLED An Open-End, Diversified Management
PAPER Investment Company
G01472-02 (1/98)

Federated Emerging Markets Fund
(A Portfolio of World Investment Series, Inc.)
Class A Shares
Class B Shares
Class C Shares

Statement of Additional Information

This Statement of Additional Information should be read with the prospectus for
Class A Shares, Class B Shares, and Class C Shares of Federated Emerging Markets
Fund (the "Fund") dated January 31, 1998. This Statement is not a prospectus
itself. You may request a copy of either prospectus or a paper copy of this
Statement of Additonal Information, if you have received it electronically, free
of charge by calling 1-800-341-7400.

Federated Emerging Markets Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Statement dated January 31, 1998

[LOGO OF FEDERATED INVESTORS]

Federated Securities Corp., Distributor

Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

- ------------------------------
www.federatedinvestors.com
- ------------------------------

Cusip 981487804
Cusip 981487887
Cusip 981487879 [LOGO]
G01472-03 (1/98) RECYCLED
PAPER

Table of Contents

<TABLE>
<S> <C>
General Information About the Fund 1
Investment Objective and Policies 1
Convertible Securities 1
Investing in Securities of Other
Investment Companies 1
Warrants 1
Sovereign Debt Obligations 1
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Futures and Options Transactions 3
Risks 5
Foreign Currency Transactions 8
Portfolio Turnover 10
Investment Limitations 11
World Investment Series, Inc. Management 13
Fund Ownership 16
Directors Compensation 17
Investment Advisory Services 17
Adviser to the Fund 17
Advisory Fees 17
Other Related Services 18
Brokerage Transactions 18
Other Services 18
Fund Administration 18
Custodian 18
Transfer Agent and Dividend Disbursing Agent 18
Independent Auditors 19
Purchasing Shares 19
Quantity Discounts and Accumulated Purchases 19
Concurrent Purchases 19
Letter of Intent 19
Reinvestment Privilege 19
Conversion of Class B Shares 20
Distribution Plan and Shareholder
Services Agreement 20
Conversion to Federal Funds 20
Purchases by Sales Representatives, Fund
Directors, and Employees 20
Determining Net Asset Value 21
Determining Market Value of Securities 21
Trading in Foreign Securities 21
Redeeming Shares 21
Redemption in Kind 22
Contingent Deferred Sales Charge 22
Tax Status 22
The Fund's Tax Status 22
Foreign Taxes 23
Shareholders' Tax Status 23
Total Return 23
Yield 23
Performance Comparisons 23
Economic and Market Information 25
About Federated Investors 25
Mutual Fund Market 26
Institutional Clients 26
Bank Marketing 26
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 26
Financial Statements 26
</TABLE>

General Information About the Fund

The Fund is a portfolio of World Investment Series, Inc. (the "Corporation"),
which was incorporated under the laws of the State of Maryland on January 25,
1994.

Investment Objective and Policies

The investment objective of the Fund is to provide long-term growth of capital.
Any income realized from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in securities of issuers and
companies domiciled in or having primary operations in emerging markets. The
investment objective cannot be changed without approval of shareholders.

Convertible Securities

Investing in Securities of Other Investment Companies

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

Warrants

Sovereign Debt Obligations

When-Issued and Delayed Delivery Transactions

Lending of Portfolio Securities

Repurchase Agreements

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

Reverse Repurchase Agreements

The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future, the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.

Restricted and Illiquid Securities

The ability of the Directors to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC") staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933, as amended (the "Rule"). The Rule is a non-exclusive safe-harbor
for certain secondary market transactions involving registration for resales of
otherwise restricted securities to qualified institutional buyers. The Rule was
expected to further enhance the liquidity of the secondary market for securities
eligible for resale under the Rule. The Fund believes that the staff of the SEC
has left the question of determining the liquidity of all restricted securities
to the Directors. The Directors may consider the following criteria in
determining the liquidity of certain restricted securities:

. the frequency of trades and quotes for the security;

. the number of dealers willing to purchase or sell the security and the
number of other potential buyers;

. dealer undertakings to make a market in the security; and

. the nature of the security and the nature of the marketplace trades.

Futures and Options Transactions

Futures Contracts The Fund may engage in futures contracts. A futures contract
is a firm commitment by two parties, the seller who agrees to make delivery of
the specific type of security called for in the contract ("going short") and the
buyer who agrees to take delivery of the security ("going long") at a certain
time in the future. However, a securities index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index was originally
written. No physical delivery of the underlying securities in the index is made.

The purpose of the acquisition or sale of a futures contract by the Fund is to
protect the Fund from fluctuations in the value of its securities caused by
unanticipated changes in interest rates or market conditions without necessarily
buying or selling the securities. For example, in the fixed income securities
market, price generally moves inversely to interest rates. A rise in rates
generally means a drop in price. Conversely, a drop in rates generally means a
rise in price. In order to hedge its holdings of fixed income securities against
a rise in market interest rates, the Fund could enter into contracts to deliver
securities at a predetermined price (i.e., "go short") to protect itself against
the possibility that the prices of its fixed income securities may decline
during the anticipated holding period. The Fund would "go long" (i.e., agree to
purchase securities in the future at a predetermined price) to hedge against a
decline in market interest rates. The Fund may also invest in securities index
futures contracts when the investment adviser believes such investment is more
efficient, liquid, or cost-effective than investing directly in the securities
underlying the index.

Stock Index Options

Put Options on Financial Futures Contracts

Call Options on Financial and Stock Index Futures Contracts

"Margin" in Futures Transactions

The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.

Purchasing Put and Call Options on Portfolio Securities

Writing Covered Put and Call Options on Portfolio Securities

Over-the-Counter Options

Risks

Options

Combined Transactions

Swaps, Caps, Floors and Collars

The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments. Inasmuch as these
swaps, caps, floors, and collars are entered into for good faith hedging
purposes, the investment adviser and the Fund believe such obligations do
not constitute senior securities under the Investment Company Act of 1940,
as amended, and, accordingly, will not treat them as being subject to its
borrowing restrictions. There is no minimal acceptable rating for a swap,
cap, floor, or collar to be purchased or held in the Fund's portfolio. If
there is a default by the counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap
market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.

Risks of Hedging Strategies

Outside the U.S. When conducted outside the U.S., hedging strategies may
not be regulated as rigorously as in the U.S., may not involve a clearing
mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions
also could be adversely affected by: (i) other complex foreign political,
legal and economic factors, (ii) lesser availability than in the U.S. of
data on which to make trading decisions, (iii) delays in the Fund's ability
to act upon economic events occurring in foreign markets during
non-business hours in the U.S., (iv) the imposition of different exercise
and settlement terms and procedures and the margin requirements than in the
U.S., and (v) lower trading volume and liquidity.

Use of Segregated and Other Special Accounts

In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.

The Fund's activities involving hedging strategies may be limited by the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code") for qualification as a regulated investment company. (See "Tax
Status")

Foreign Currency Transactions

Currency Risks

The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the Fund
values its assets daily in U.S. dollars, the Fund may not convert its
holdings of foreign currencies to U.S. dollars daily. The Fund may incur
conversion costs when it converts its holdings to another currency. Foreign
exchange dealers may realize a profit on the difference between the price
at which the Fund buys and sells currencies.

Forward Foreign Currency Exchange Contracts

Foreign Currency Options

Special Risks

Associated with Foreign Currency Options Buyers and sellers of foreign
currency options are subject to the same risks that apply to options
generally. In addition, there are certain risks associated with foreign
currency options. The markets in foreign currency options are relatively
new, and the Fund's ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
Although the Fund will not purchase or write such options unless and until,
in the opinion of the investment adviser, the market for them has developed
sufficiently to ensure that the risks in connection with such options are
not greater than the risks in connection with the underlying currency,
there can be no assurance that a liquid secondary market will exist for a
particular option at any specific time.

In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.

Foreign Currency Futures Transactions

Special Risks Associated with Foreign Currency Futures Contracts and Related
Options

Special Considerations Affecting Emerging Markets

Investing in equity securities of companies in emerging markets may entail
greater risks than investing in equity securities in developed countries.
These risks include (i) less social, political and economic stability; (ii)
the small current size of the markets for such securities and the currently
low or nonexistent volume of trading, which result in a lack of liquidity
and in greater price volatility; (iii) certain national policies which may
restrict the Fund's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; and (v) the absence of developed structures
governing private or foreign investment or allowing for judicial redress
for injury to private property. Investing in the securities of companies in
emerging markets, may entail special risks relating to the potential
political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation by any country, the Fund could lose
its entire investment in any such country.

Settlement mechanisms in emerging markets may be less efficient and
reliable than in more developed markets. In such emerging securities
markets there may be share registration and delivery delays or failures.

Most Latin American countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates and corresponding currency
devaluations have had any may continue to have negative effects on the
economies and securities markets of certain Latin American countries.

Political, Social and Economic Risks

Even though opportunities for investment may exist in emerging markets, any
change in the leadership or policies of the governments of those countries
or in the leadership or policies of any other government which exercises a
significant influence over those countries, may halt the expansion of or
reverse the liberalization of foreign investment policies now occurring and
thereby eliminate any investment opportunities which may currently exist.

Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of Latin American countries previously
expropriated large quantities of real and personal property similar to the
property which will be represented by the securities purchased by the Fund.
The claims of property owners against those governments were never finally
settled. There can be no assurance that any property represented by
securities purchased by the Fund will not also be expropriated,
nationalized, or otherwise confiscated. If such confiscation were to occur,
the Fund could lose its entire investment in such countries. The Fund's
investments would similarly be adversely affected by exchange control
regulation in any of those countries.

Certain countries in which the Fund may invest may have groups that
advocate radical religious or revolutionary philosophies or support ethnic
independence. Any disturbance on the part of such individuals could carry
the potential for widespread destruction or confiscation of property owned
by individuals and entities foreign to such country and could cause the
loss of the Fund's investment in those countries. Instability may also
result from, among other things: (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
government through extraconsititutional means; (ii) popular unrest
associated with demands for improved political, economic and social
conditions; and (iii) hostile relations with neighboring or other
countries. Such political, social and economic instability could disrupt
the principal financial markets in which the Fund invests and adversely
affect the value of the Fund's assets.

Additional Risk Considerations

The Directors consider at least annually the likelihood of the imposition
by any foreign government of exchange control restrictions which would
affect the liquidity of the Fund's assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of
foreign governments to which such assets may be exposed. The Directors also
consider the degree of risk involved through the holding of portfolio
securities in domestic and foreign securities depositories. However, in the
absence of willful misfeasance, bad faith or gross negligence on the part
of the investment adviser, any losses resulting from the holding of the
Fund's portfolio securities in foreign countries and/or with securities
depositories will be at the risk of shareholders. No assurance can be given
that the Directors' appraisal of the risks will always be correct or that
such exchange control restrictions or political acts of foreign governments
might not occur.

Portfolio Turnover

Investment Limitations

The following investment limitations are fundamental (except that no investment
limitation of the Fund shall prevent the Fund from investing substantially all
of its assets (except for assets which are not considered "investment
securities" under the Investment Company Act of 1940, as amended, or assets
exempted by the SEC) in an open-end investment company with substantially the
same investment objectives):

Selling Short and Buying on Margin

Issuing Senior Securities and Borrowing Money

Pledging Assets

Concentration of Investments

Investing in Commodities

Investing in Real Estate

Lending Cash or Securities

Underwriting

Diversification of Investments

The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval (except that no investment
limitation of the Fund shall prevent the Fund from investing substantially
all of its assets (except for assets which are not considered "investment
securities" under the Investment Company Act of 1940, as amended, or assets
exempted by the SEC) in an open-end investment company with substantially
the same investment objectives). Shareholders will be notified before any
material changes in these limitations become effective.

Investing in Illiquid Securities

Purchasing Securities to Exercise Control

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

Investing in Put Options

Writing Covered Call Options

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 associations having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be "cash items."

World Investment Series, Inc. Management

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

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Director and Chairman

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Director

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

William J. Copeland
One PNC Plaza-23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Director

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 N 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

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.

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; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Director

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Director

Public relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930
Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938
Executive Vice President, Secretary and Treasurer

* 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; 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.N1999; Liberty U.S. Government Money Market Trust; Liquid Cash Trust;
Managed Series Trust; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Obligations Trust II; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; 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; Wesmark
Funds; WCT Funds; and World Investment Series, Inc.

Fund Ownership

As of January 7, 1998, Officers and Directors as a group own less than 1% of the
Fund's outstanding shares.

As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding Class A Shares of the Fund: Union Planters National Bank,
Memphis, Tennessee, owned approximately 208,402 shares (5.37%); Charles Schwab &
Co., Inc., San Francisco, California, owned approximately 676,381 shares
(17.42%); Frojack Co., Grand Forks, North Dakota, owned approximately 263,545
shares (6.79%); and Federated International Growth Fund, Pittsburgh,
Pennsylvania, owned approximately 219,806 shares (5.66%).

As of January 7, 1998, the following shareholder 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 81,520 shares (28.40%).

Directors Compensation

<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue $ -0- $-0- for the Corporation and
Chairman and Director 56 investment companies in the Fund Complex
Thomas G. Bigley $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
John T. Conroy, Jr. $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex
William J. Copeland $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex
James E. Dowd $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
Richard B. Fisher $ -0- $-0- for the Corporation and
President and Director 6 investment companies in the Fund Complex
Edward L. Flaherty, Jr. $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex
Peter E. Madden $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
John E. Murray, Jr. $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
Wesley W. Posvar $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
Marjorie P. Smuts $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
</TABLE>

* Information is furnished for the fiscal year ended November 30, 1997.

# The aggregate compensation is provided for the Corporation, which was
comprised of 8 portfolios.

+ The information is provided for the last calendar year end.

Investment Advisory Services

Adviser to the Fund

Advisory Fees

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

For the fiscal year ended November 30, 1997 and for the period from February 28,
1996 (date of initial public investment) to November 30, 1996, the Adviser
earned $775,299 and $121,495, respectively, of which $408,722 and $121,495,
respectively, were voluntarily waived.

Other Related Services

Brokerage Transactions

<PAGE>

Other Services

Fund Administration

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in each
prospectus. From January 31, 1996, to March 1, 1996, Federated Administrative
Services, also a subsidiary of Federated Investors, served as the Fund's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal year ended
November 30, 1997 and for the period from February 28, 1996 (date of initial
public investment) to November 30, 1996, the Adminstrators earned $185,000 and
$141,023, respectively.

Custodian

State Street Bank and Trust Company, Boston, Massachusetts, 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 and Dividend Disbursing Agent

Independent Auditors

The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.

Purchasing Shares

Quantity Discounts and Accumulated Purchases

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

Concurrent Purchases

Shareholders have the privilege of combining concurrent purchases of the same
Share class of two or more funds in the Federated Complex in calculating the
applicable sales charge.

Letter of Intent

A Shareholder can sign a letter of intent committing to purchase a certain
amount of the same Share class within a 13month period in order to combine such
purchases in calculating the applicable sales charge. The Fund's custodian will
hold Shares in escrow equal to the maximum applicable sales charge. If the
shareholder completes the commitment, the escrowed Shares will be released to
their account. If the commitment is not completed within 13 months, the
custodian will redeem an appropriate number of escrowed Shares to pay for the
applicable sales charge.

Reinvestment Privilege

The reinvestment privilege is available for all Shares of the Fund within the
same Share Class.

Conversion of Class B Shares

Distribution Plan and Shareholder Services Agreement

For the fiscal year ended November 30, 1997, the Fund's Class B Shares and Class
C Shares paid $113,971 and $23,747, respectively, in distribution services fees,
none of which were voluntarily waived. Class A Shares have no present intention
of paying or accruing distribution services fees during the fiscal year ending
November 30, 1998. In addition, for the fiscal year ended November 30, 1997, the
Fund's Class A Shares, Class B Shares and Class C Shares paid shareholder
services fees in the amount of $109,154, $37,990, and $7,916, respectively, none
of which were voluntarily waived.

Conversion to Federal Funds

Purchases by Sales Representatives, Fund Directors, and Employees

The following individuals and their immediate family members may buy Class A
Shares at net asset value without a sales charge:

. Directors, employees, and sales representatives of the Fund, Federated
Global Research, and Federated Securities Corp. and its affiliates;

. Federated Life Members (Class A Shares only);

. any associated person of an investment dealer who has a sales agreement
with Federated Securities Corp.; and

. trusts, pensions, or profit-sharing plans for these individuals.

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

Determining Net Asset Value

Determining Market Value of Securities

Market values of the Fund's portfolio securities, other than options, are
determined as follows:

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

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

. for bonds and other fixed income securities, as determined by an
independent pricing service;

. for all other securities, at fair value as determined in good faith by
the Directors.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: 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

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
prospectus under "Redeeming and Exchanging 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.

Redemption in Kind

Contingent Deferred Sales Charge

Elimination of the Contingent Deferred Sales ChargeNClass B Shares

Tax Status

The Fund's Tax Status

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

. invest in securities within certain statutory limits; and

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

Foreign Taxes

Shareholders' Tax Status

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 Fund's average annual total returns based on offering price for the
following periods ended November 30, 1997 were:

<TABLE>
<CAPTION>
Share Class Inception Date One-Year Since Inception
<S> <C> <C> <C>
Class A 2/28/96 (0.94%) 5.58%
Class B 2/28/96 (1.36%) 5.73%
Class C 2/28/96 3.08% 8.27%
</TABLE>

Yield

Performance Comparisons

The performance of each of the classes of Shares depends upon such variables as:

. portfolio quality;

. average portfolio maturity;

. type of instruments in which the portfolio is invested;

. changes in interest rates and market value of portfolio securities;

. changes in the Fund's or any class of Shares' expenses; and

. various other factors.

. Lipper Analytical Services, Inc., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividendsand takes
into account any change in net asset value over a specified period of time.
From time to time, the Fund will quote its Lipper ranking in the "latin
american region funds" category in advertising and sales literature.

. Morgan Stanley Capital International World Indices, including, among others,
the Morgan Stanley Capital International Europe, Australia, Far East Index
("EAFE Index"). The EAFE Index is an unmanaged index of more than 1,000
companies of Europe, Australia, and the Far East.

. Morgan Stanley Capital International Latin America Emerging Market Indices,
including the Morgan Stanley Emerging Markets Free Latin America Index (which
excludes Mexican banks and securities companies which cannot be purchased by
foreigners) and the Morgan Stanley Emerging Markets Global Latin America
Index. Both indices include 60% of the market capitalization of the following
countries: Argentina, Brazil, Chile, and Mexico. The indices are weighted by
market capitalization and are calculated without dividends reinvested.

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

. Ibbotson Associates International Bond Index, which provides a detailed
breakdown of local market and currency returns since 1960.

. Bear Stearns Foreign Bond Index, which provides simple average returns for
individual countries and GNP-weighted index, beginning in 1975. The returns
are broken down by local market and currency.

. Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

. Financial Times Actuaries IndicesNincluding the FTA-World Index (and
components thereof), which are based on stocks in major world equity markets.

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

. CNBC/Financial News Composite Index.

. Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.

. Datastream, InterSec, FactSet, Ibbotson Associates, and Worldscope are
database retrieval services for information including, but not limited to,
international financial and economic data.

. International Financial Statistics, which is produced by the
International Monetary Fund.

. Various publications and annual reports produced by the World Bank and
its affiliates.

. Various publications from the International Bank for Reconstruction and
Development.

. Various publications including, but not limited to, ratings agencies
such as Moody's Investors Service, Inc., Fitch Investors Service, Inc. and
Standard & Poor's Ratings Group.

. Wilshire Associates, which is an on-line database for international financial
and economic data including performance measures for a wide range of
securities.

. International Finance Corporation (IFC) Emerging Markets Data Base, which
provides detailed statistics on stock and bond markets in developing
countries, including IFC market indices.

. Various publications from the Organization for Economic Cooperation and
Development (OECD).

Advertisements may quote performance information which does not reflect the
effect of the sales charge on Class A Shares.

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 Funds. 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 makingNstructured, 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.

Mutual Fund Market

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

Institutional Clients

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
nationwideNwe have over 2,200 broker/dealer and bank broker/dealer relationships
across the countryNsupported by more wholesalers than any other mutual fund
distributor. Federated's services 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.

Financial Statements

* Source: Investment Company Institute

FEDERATED EUROPEAN GROWTH FUND

(A Portfolio of World Investment Series, Inc.)
Class A Shares, Class B Shares, Class C Shares

PROSPECTUS

The shares of Federated European 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 the equity securities of European companies.

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

Prospectus dated January 31, 1998

Table of Contents

<TABLE>
<S> <C>
Summary of Fund Expenses............................. 1
Financial Highlights--Class A Shares................. 2
Financial Highlights--Class B Shares................. 3
Financial Highlights--Class C Shares................. 4
General Information.................................. 5
Calling the Fund.................................... 5
Investment Information............................... 5
Investment Objective................................ 5
Investment Policies................................. 5
Portfolio Turnover.................................. 13
Investment Limitations.............................. 13
Net Asset Value...................................... 13
Investing in the Fund................................ 13
Purchasing Shares.................................... 14
Purchasing Shares Through a Financial Intermediary.. 14
Purchasing Shares by Wire........................... 14
Purchasing Shares by Check.......................... 14
Systematic Investment Program....................... 14
Retirement Plans.................................... 14
Class A Shares...................................... 14
Class B Shares...................................... 15
Class C Shares...................................... 15
Redeeming and Exchanging Shares...................... 15
Redeeming or Exchanging Shares Through a
Financial Intermediary.............................. 15
Redeeming or Exchanging Shares by Telephone......... 16
Redeeming or Exchanging Shares by Mail.............. 16
Requirements for Redemption......................... 16
Requirements for Exchange........................... 16
Systematic Withdrawal Program....................... 16
Contingent Deferred Sales Charge.................... 17
Account and Share Information........................ 17
Confirmations and Account Statements................ 17
Dividends and Distributions......................... 17
Accounts with Low Balances.......................... 17
Corporation Information.............................. 17
Management of the Corporation....................... 17
Distribution of Shares.............................. 19
Administration of the Fund.......................... 20
Brokerage Transactions.............................. 20
Shareholder Information.............................. 20
Tax Information...................................... 20
Federal Income Tax.................................. 20
State and Local Taxes............................... 21
Performance Information 21
Appendix............................................. 21
</TABLE>

SUMMARY OF FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).......................................... 5.50% None None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).......................................... None None None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)........................ None 5.50%(1) 1.00%(2)
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None None None
Exchange Fee................................................................. None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)*
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Management Fee (after waiver)(3)............................................. 0.00% 0.00% 0.00%
12b-1 Fee.................................................................... 0.00%(4) 0.75% 0.75%
Total Other Expenses (after expense reimbursement)........................... 1.84% 1.84% 1.84%
Shareholder Services Fee.................................................... 0.25% 0.25% 0.25%
Total Operating Expenses..................................................... 1.84%(5) 2.59%(6)(7) 2.59%(7)
</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."
(2) 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 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%.

(4) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1998. 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."
(5) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1998. The total
operating expenses were 1.91% for the fiscal year ended November 30, 1997
and would have been 4.70% absent the voluntary waiver of the management fee
and the voluntary reimbursement of certain other operating expenses.
(6) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

(7) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1998. The total
operating expenses were 2.66% for the fiscal year ended November 30, 1997
and would have been 5.45% absent the voluntary waiver of the management fee
and the voluntary reimbursement of certain other operating expenses.

* Total operating expenses are estimated based on average expenses expected to
be incurred during the period ending November 30, 1998. During the course of
this period, expenses may be more or less than the average amount shown.

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Class A, Class B or Class C Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Purchasing Shares" and
"Corporation Information." Wire-transferred redemptions of less than $5,000 may
be subject to additional fees.

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

EXAMPLE CLASS A CLASS B CLASS C
<S> <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.
1 Year $ 73 $ 83 $ 36
3 Years $110 $124 $ 81
5 Years $149 $160 $138
10 Years $259 $273 $292
You would pay the following expenses on the same investment, assuming no redemption.
1 Year $ 26 $ 26
3 Years $ 81 $ 81
5 Years $138 $138
10 Years $273 $292
</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

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06(e) 0.14
Net realized and unrealized gain on investments and foreign currency 1.93 1.66
Total from investment operations 1.99 1.80
LESS DISTRIBUTIONS
Distributions from net investment income (0.09) --
Distributions from net realized gain on investments and foreign currency
transactions (0.37) --
Total distributions (0.46) --
NET ASSET VALUE, END OF PERIOD $ 13.33 $ 11.80
TOTAL RETURN(B) 17.54% 18.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.91% 1.75%*
Net investment income 0.50% 1.60%*
Expense waiver/reimbursement(c) 2.79% 11.10%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $17,008 $ 3,318
Average commission rate paid(d) $0.0563 $ 0.0223
Portfolio turnover 119% 58%
</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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) Per share information is based on average shares outstanding.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS--CLASS B SHARES

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.74 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.03)(e) 0.01
Net realized and unrealized gain (loss) on investments and foreign
currency 1.91 1.73
Total from investment operations 1.88 1.74
Less distributions
Distributions from net investment income (0.07) --
Distributions from net realized gain on investments and foreign currency
transactions (0.37) --
Total distributions (0.44) --
NET ASSET VALUE, END OF PERIOD $ 13.18 $ 11.74
TOTAL RETURN(B) 16.61% 17.40%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.66% 2.50%*
Net investment income (loss) (0.25%) 0.08%*
Expense waiver/reimbursement(c) 2.79% 11.10%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 5,781 $ 1,215
Average commission rate paid(d) $0.0563 $ 0.0223
Portfolio turnover 119% 58%

</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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income (loss) ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) Per share information is based on average shares outstanding.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS--CLASS C SHARES

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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,
1997 1997(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.73 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.03)(e) 0.01
Net realized and unrealized gain (loss) on investments and foreign
currency 1.90 1.72
Total from investment operations 1.87 1.73
LESS DISTRIBUTIONS
Distributions from net investment income (0.08) --
Distributions from net realized gain on investments and foreign currency
transactions (0.37) --
Total distributions (0.45) --
NET ASSET VALUE, END OF PERIOD $ 13.15 $ 11.73
TOTAL RETURN(B) 16.55% 17.30%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.66% 2.50%*
Net investment income (loss) (0.23%) 0.09%*
Expense waiver/reimbursement(c) 2.79% 11.06%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 768 $ 176
Average commission rate paid(d) $0.0563 $ 0.0223
Portfolio turnover 119% 58%
</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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income (loss) ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) Per share information is based on average shares outstanding.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

CALLING THE FUND Call the Fund at 1-800-341-7400.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

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

The Fund expects the majority of its equity assets to be invested in the more
established or liquid markets of Europe, including Austria, Belgium, Denmark,
Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Spain,
Sweden, Switzerland, and the United Kingdom. The Fund may invest in countries
other than those defined above, if, in the opinion of the Fund's investment
adviser, they are considered to be attractive or liquid. These countries include
Albania, Belarus, Bulgaria, Czech Republic, Estonia, Greece, Hungary, Iceland,
Latvia, Lithuania, Luxembourg, Poland, Portugal, Romania, Russia, Slovakia,
Turkey, Ukraine, and countries of the former Yugoslavia.

While the investment adviser considers the above-mentioned countries eligible
for investment, the Fund will not be invested in all such markets at all times.
Furthermore, the Fund may not pursue investment in such countries due to lack of
adequate custody of the Fund's assets, overly burdensome restrictions and
repatriation, lack of an organized and liquid market, or unacceptable political
or other risks. 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.

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

ACCEPTABLE INVESTMENTS

COMMON AND PREFERRED STOCK

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

DEBT SECURITIES

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

CONVERTIBLE SECURITIES

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as DECS--
(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS--(Liquid Yield Option Notes, which are
corporate bonds that are purchased at prices below par with no coupons and are
convertible into stock), PERCS--(Preferred Equity Redemption Cumulative Stock,
an equity issue that pays a high cash dividend, has a cap price and mandatory
conversion to common stock at maturity), and PRIDES--(Preferred Redeemable
Increased Dividend Securities, which are essentially the same as DECS; the
difference is little more than who initially underwrites the issue).

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

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 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 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.

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

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
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.

FUTURES AND OPTIONS ON FUTURES

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

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

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

RISK CHARACTERISTICS OF FOREIGN SECURITIES

CURRENCY RISKS

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

. less publicly available information about foreign issuers;

. credit risks associated with certain foreign governments;

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

. less readily available market quotations on foreign issues;

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

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

. the 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

RISK CONSIDERATIONS OF EUROPEAN COMPANIES

Greater Europe includes both the industrialized nations of Western Europe and
the less wealthy or developed countries in Southern and Eastern Europe. Within
this diverse area, the Fund seeks to benefit from accelerating economic growth
transformation and deregulation taking hold. These developments involve, among
other things, increased privatizations and corporate restructurings, the
reopening of equity markets and economies in Eastern Europe, further broadening
of the European Community, and the implementation of economic policies to
promote non-inflationary growth. The Fund invests in companies it believes are
well placed to benefit from these and other structural and cyclical changes now
underway in this region of the world. The Fund will invest, under normal market
conditions, at least 65% of its assets in the equity securities of European
companies.

The securities markets of many European countries are relatively small, with the
majority of market capitalization and trading volume concentrated in a limited
number of companies representing a small number of industries. Consequently, the
Fund's investment portfolio may experience greater price volatility and
significantly lower liquidity than a portfolio invested in equity securities of
U.S. companies. These markets may be subject to greater influence by adverse
events generally affecting the market, and by large investors trading
significant blocks of securities, than is usual in the U.S. Securities
settlements may in some instances be subject to delays and related
administrative uncertainties.

RISK FACTORS RELATING TO INVESTING IN HIGH
YIELD SECURITIES

PORTFOLIO TURNOVER

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The NAV is
determined as of the close of trading on the New York Stock Exchange (normally
4:00 p.m. Eastern time) every day the New York Stock Exchange is open.

INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the characteristics
described below.

CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Minimum and
Subsequent
Investment Amounts $1500/$100 $1500/$100 $1500/$100
Minimum and
Subsequent
Investment Amount
for Retirement Plans $ 250/$100 $ 250/$100 $ 250/$100
Maximum Sales Charge 5.50%* None None
Maximum Contingent
Deferred Sales Charge** None 5.50%* 1.00%#
Conversion Feature No Yes++ No

</TABLE>

* Class A Shares are sold at NAV, plus a sales charge as follows:

SALES CHARGE DEALER
AS A PERCENTAGE OF CONCESSION AS
PUBLIC NET A PERCENTAGE OF
OFFERING AMOUNT PUBLIC OFFERING
<S> <C> <C> <C>
Amount of Transaction Price Invested Price
Less than $50,000 5.50% 5.82% 5.00%
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>

** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption.

+ The following contingent deferred sales charge schedule applies to Class B
Shares:

YEAR OF REDEMPTION CONTINGENT 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 B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase. See "Conversion of Class B
Shares."
# The contingent deferred sales charge is assessed on Shares redeemed within
one year of their purchase date.

PURCHASING SHARES

In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor.

PURCHASING SHARES THROUGH A
FINANCIAL INTERMEDIARY

PURCHASING SHARES BY WIRE

Shares may be purchased by Federal Reserve wire by calling the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Shareholder Services Company, c/o State Street
Bank and Trust Company, Boston, MA 02266-8600; Attention: EDGEWIRE; For Credit
to: (Fund Name) (Fund Class); (Fund Number--this number can be found on the
account statement or by contacting the Fund); 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.

PURCHASING SHARES BY CHECK

Shares may be purchased by mailing a check made payable to the name of the Fund
(designate class of Shares and account number) to: Federated Shareholder
Services Company, P.O.Box8600, Boston, MA 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).

SYSTEMATIC INVESTMENT PROGRAM

RETIREMENT PLANS
Fund Shares can be purchased as an investment for retirement plans or Individual
Retirement Accounts ("IRA"). For further details, contact the Fund and consult a
tax adviser.

CLASS A SHARES
Class A Shares are sold at NAV, plus a sales charge. However:

NO SALES CHARGE IS IMPOSED FOR CLASS A
SHARES PURCHASED:

. through financial intermediaries that do not receive sales charge dealer
concessions;

. by Federated Life Members; or

. through "wrap accounts" or similar programs under which clients pay a fee for
services.

IN ADDITION, THE SALES CHARGE CAN BE REDUCED OR ELIMINATED BY:

. purchasing in quantity and accumulating purchases at the levels in the table
under "Investing in the Fund";

. combining concurrent purchases of two or more funds;

. signing a letter of intent to purchase a specific quantity of shares within
13 months; or

. using the reinvestment privilege.

DEALER CONCESSION

CLASS B SHARES

CONVERSION OF CLASS B SHARES

CLASS C SHARES

Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00% will
be charged on assets redeemed within the first full 12 months following
purchase.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Shares of the same
class of other Federated Funds on days on which the Fund computes its NAV.
Shares are redeemed at NAV less any applicable contingent deferred sales charge.
However, in order to protect shareholders of the Fund from possible detrimental
effects of redemptions, the Adviser may cause a delay of two to seven days in
sending redemption proceeds during certain periods of market volatility or for
certain shareholders. Exchanges are made at NAV. Shareholders who desire to
automatically exchange Shares, of a like class, in a pre-determined amount on a
monthly, quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. Depending upon the circumstances, a capital gain or loss
may be realized when Shares are redeemed or exchanged.

REDEEMING OR EXCHANGING SHARES THROUGH A
FINANCIAL INTERMEDIARY

REDEEMING OR EXCHANGING SHARES BY TELEPHONE

REDEEMING OR EXCHANGING SHARES BY MAIL

REQUIREMENTS FOR REDEMPTION

REQUIREMENTS FOR EXCHANGE

SYSTEMATIC WITHDRAWAL PROGRAM

CONTINGENT DEFERRED SALES CHARGE

ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE
Upon written notification to Federated Securities Corp. or the transfer agent,
no contingent deferred sales charge will be imposed on redemptions:

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

. representing minimum required distributions from an IRA or other retirement
plan to a shareholder who has attained the age of 701/2;

. which are involuntary redemptions of shareholder accounts that do not comply
with the minimum balance requirements;

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

. which are reinvested in the Fund under the reinvestment privilege;

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

DIVIDENDS AND DISTRIBUTIONS

ACCOUNTS WITH LOW BALANCES

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

ADVISORY FEES

The 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. 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.

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $120 billion invested across more
than 300 funds under management and/or administration by its subsidiaries, as
of December31, 1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,000 financial
institutions nationwide.

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 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 Wharton School of the University of Pennsylvania.

Frank Semack has been the Fund's portfolio manager since its inception. Mr.
Semack joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. Mr. Semack served as an Investment Analyst at Omega
Advisers, Inc. from 1993 to 1994. He served as a Portfolio Manager/Associate
Director of Wardley Investment Services, Ltd. from 1980 to 1993. Mr. Semack
received his M.Sc. in economics from the London School of Economics.

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

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS

Furthermore, with respect to Class A Shares, Class B Shares, and Class C Shares,
Federated Securities Corp. and Federated Shareholder Services may offer to pay a
fee from their own assets to financial institutions as financial assistance for
providing substantial 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 Fund's Adviser or its affiliates.

ADMINISTRATION OF THE FUND

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
<S> <C>
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

</TABLE>

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

Directors may be removed by the Directors or 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.

As of January 7, 1998, the following shareholder of record owned 25% or more of
the outstanding Class A Shares of the Fund: Federated International Growth Fund,
Pittsburgh, Pennsylvania, owned approximately 454,082 Class A Shares (34.18%)
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.

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.

STATE AND LOCAL TAXES

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.

APPENDIX

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

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

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

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

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

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

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

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.

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, L.P. LONG-TERM DEBT
RATING DEFINITIONS

categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

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.

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

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

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

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL
PAPER RATINGS

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

. Leading market positions in well established industries.

. High rates of return on funds employed.

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

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

. 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 SERVICES
COMMERCIAL PAPER RATINGS

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

FITCH INVESTORS SERVICE, L.P. 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.

NOTES

[LOGO] FEDERATED INVESTORS

FEDERATED EUROPEAN
GROWTH FUND

(A Portfolio of World Investment
Series, Inc.)

Class A Shares, Class B Shares,
Class C Shares

PROSPECTUS
JANUARY 31, 1998

An Open-End, Diversified Management
Investment Company

FEDERATED EUROPEAN
GROWTH FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

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

TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

Federated Securities Corp., Distributor

1-800-341-7400

www.federatedinvestors.com

Cusip 981487861
Cusip 981487853 [LOGO]
Cusip 981487846 RECYCLED An Open-End, Diversified Management
PAPER Investment Company
G01469-02 (1/98)

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

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus for
Class A Shares, Class B Shares, and Class C Shares of Federated European Growth
Fund (the "Fund") dated January 31, 1998. This Statement is not a prospectus
itself. You may request a copy of either prospectus or a paper copy of this
Statement of Additional Information, if you have received it electronically,
free of charge by calling 1-800-341-7400.

FEDERATED EUROPEAN GROWTH FUND
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000

Statement dated January 31, 1998

[LOGO] FEDERATED INVESTORS

Federated Securities Corp., Distributor

Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Cusip 981487861
Cusip 981487853 [LOGO OF RECYCLED PAPER]
Cusip 981487846
G01469-03 (1/98)

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

General Information About the Fund 1
- ----------------------------------------------------

Investment Objective and Policies 1
- ----------------------------------------------------
Convertible Securities 1
Investing in Securities of Other
Investment Companies 1
Warrants 1
Sovereign Debt Obligations 1
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Futures and Options Transactions 3

Risks 5
Foreign Currency Transactions 8

Additional Risk Considerations 9
Special Considerations Affecting Europe 10
Portfolio Turnover 10
Investment Limitations 10

World Investment Series, Inc. Management 13
- ----------------------------------------------------
Fund Ownership 16
Directors Compensation 17

Investment Advisory Services 17
- ----------------------------------------------------
Adviser to the Fund 17
Advisory Fees 17
Other Related Services 18

Brokerage Transactions 18
- ----------------------------------------------------

Other Services 18
- ----------------------------------------------------
Fund Administration 18
Custodian and Portfolio Accountant 18
Transfer Agent 18
Independent Auditors 18

Purchasing Shares 19
- ----------------------------------------------------
Quantity Discounts and Accumulated Purchases 19
Concurrent Purchases 19
Letter of Intent 19
Reinvestment Privilege 19
Conversion of Class B Shares 20
Distribution Plan and Shareholder
Services Agreement 20
Conversion to Federal Funds 20
Purchases by Sales Representatives, Fund
Directors, and Employees 20

Determining Net Asset Value 21
- ----------------------------------------------------
Determining Market Value of Securities 21
Trading in Foreign Securities 21

Redeeming Shares 21
- ----------------------------------------------------
Redemption in Kind 21
Contingent Deferred Sales Charge 22

Tax Status 22
- ----------------------------------------------------
The Fund's Tax Status 22
Foreign Taxes 22
Shareholders' Tax Status 22

Total Return 23
- ----------------------------------------------------

Yield 23
- ----------------------------------------------------

Performance Comparisons 23
- ----------------------------------------------------
Economic and Market Information 25

About Federated Investors 25
- ----------------------------------------------------
Mutual Fund Market 25
Institutional Clients 25
Bank Marketing 26
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 26

Financial Statements 26
- ----------------------------------------------------

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

The Fund is a portfolio of World Investment Series, Inc. (the "Corporation"),
which was incorporated under the laws of the State of Maryland on January 25,
1994.

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

The investment objective of the Fund is to provide long-term growth of capital.
Any income realized from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in equity securities of European
companies. The investment objective cannot be changed without approval of
shareholders.

Convertible Securities

Investing in Securities of Other Investment Companies

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

Warrants

Sovereign Debt Obligations

When-Issued and Delayed Delivery Transactions

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

Lending of Portfolio Securities

Repurchase Agreements

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

Reverse Repurchase Agreements

The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future, the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.

Restricted and Illiquid Securities

The ability of the Directors to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC") staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933, as amended (the "Rule"). The Rule is a non-exclusive safe-harbor
for certain secondary market transactions involving registration for resales of
otherwise restricted securities to qualified institutional buyers. The Rule was
expected to further enhance the liquidity of the secondary market for securities
eligible for resale under the Rule. The Fund believes that the staff of the SEC
has left the question of determining the liquidity of all restricted securities
to the Directors. The Directors may consider the following criteria in
determining the liquidity of certain restricted securities:

. the frequency of trades and quotes for the security;

. the number of dealers willing to purchase or sell the security and the
number of other potential buyers;

. dealer undertakings to make a market in the security; and

. the nature of the security and the nature of the marketplace trades.

Futures and Options Transactions

Futures Contracts

Stock Index Options

Put Options on Financial Futures Contracts

Call Options on Financial and Stock Index Futures Contracts

When the Fund purchases a call on a financial futures contract, it receives
in exchange for the payment of a cash premium the right, but not the
obligation, to enter into the underlying futures contract at a strike price
determined at the time the call was purchased, regardless of the
comparative market of such futures position at the time the option is
exercised. The holder of a call option has the right to receive a long (or
buyer's) position in the underlying futures contract. The Fund generally
will not maintain open positions in futures contracts it has sold or call
options it has written on futures contracts if, in the aggregate, the value
of the open positions (marked to market) exceeds the current market value
of its securities portfolio plus the unrealized loss or minus the
unrealized gain on those open positions, adjusted for the correlation
between the hedged securities and the futures contracts. If this limitation
is exceeded at any time, the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and options
positions within this limitation.

"Margin" in Futures Transactions

The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.

Purchasing Put and Call Options on Portfolio Securities

Writing Covered Put and Call Options on Portfolio Securities

Over-the-Counter Options

Risks

Options

Combined Transactions

Swaps, Caps, Floors and Collars

Risks of Hedging Strategies Outside the U.S.

Use of Segregated and Other Special Accounts

Hedging strategies, in addition to other requirements, require that the
Fund segregate liquid high grade assets with its custodian to the extent
Fund obligations are not otherwise "covered" through ownership of the
underlying security, financial instrument or currency. In general, either
the full amount of any obligation by the Fund to pay or deliver securities
or assets must be covered at all times by the securities, instruments or
currency required to be delivered, or, subject to any regulatory
restrictions, an amount of cash or liquid high grade securities at least
equal to the current amount of the obligation must be segregated with the
custodian. The segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer
necessary to segregate them. For example, a call option written by the Fund
will require the Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate liquid high grade securities sufficient to
purchase and deliver the securities if the call is exercised. A call option
sold by the Fund on an index will require the Fund to own portfolio
securities which correlate with the index or to segregate liquid high grade
assets equal to the excess of the index value over the exercise price on a
current basis. A put option written by the Fund requires the Fund to
segregate liquid high grade assets equal to the exercise price.

Foreign Currency Transactions

Currency Risks

The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the Fund
values its assets daily in U.S. dollars, the Fund may not convert its
holdings of foreign currencies to U.S. dollars daily. The Fund may incur
conversion costs when it converts its holdings to another currency. Foreign
exchange dealers may realize a profit on the difference between the price
at which the Fund buys and sells currencies.

Forward Foreign Currency Exchange Contracts

Foreign Currency Options

Special Risks Associated with Foreign Currency Options

In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.

Foreign Currency Futures Transactions

Special Risks Associated with Foreign Currency Futures Contracts and Related
Options

Additional Risk Considerations

Special Considerations Affecting Europe

The countries that are members of the European Union (Belgium, Denmark, France,
Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain,
Austria, Sweden, Finland, and the United Kingdom) eliminated certain import
tariffs and quotas, and other trade barriers with respect to one another over
the past several years. The adviser believes that this deregulation should
improve the prospects for economic growth in many European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled on one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear at this time what the exact form or effect of
these European Union reforms will be on business in Western Europe or the
emerging European markets, it is impossible to predict the long-term impact of
the implementation of these programs on the securities owned by the Fund.

Portfolio Turnover

Investment Limitations

Selling Short and Buying on Margin

Issuing Senior Securities and Borrowing Money

Pledging Assets

Concentration of Investments

Investing in Commodities

Investing in Real Estate

Lending Cash or Securities

Underwriting

Diversification of Investments

Investing in Illiquid Securities

Purchasing Securities to Exercise Control

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

Investing in Put Options

Writing Covered Call Options

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 associations having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be "cash items."

WORLD INVESTMENT SERIES, INC. MANAGEMENT
- --------------------------------------------------------------------------------

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

- --------------------------------------------------------------------------------
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

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
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Director

Birthdate: June 23, 1937

Director

- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza-23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Director

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

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

- --------------------------------------------------------------------------------
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; Director or Trustee of the Funds.

- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Director

- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Director

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

- --------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President

- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President , Secretary and Treasurer

- --------------------------------------------------------------------------------
* 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; 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 Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; 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; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.

Fund Ownership

As of January 7, 1998, Officers and Directors as a group own 1% or less of the
Fund's outstanding shares.

As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding voting stock of the Fund's Class A Shares: Edward C. Gonzales,
Trustee, Pittsburgh, Pennsylvania, owned approximately 190,988 shares (14.38%);
Charles Schwab & Co., Inc., San Francisco, California, owned approximately
68,930 shares (5.19%); and Federated International Growth Fund, Pittsburgh,
Pennsylvania, owned approximately 454,082 shares (34.18%).

As of January 7, 1998, no shareholders of record owned 5% or more of the
outstanding voting stock of the Fund's Class B Shares.

As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding voting stock of the Fund's Class C Shares: Merrill Lynch Pierce
Fenner & Smith, Jacksonville, Florida, for the sole benefit of its customers,
owned approximately 3,189 shares (5.49%) and Bear Stearns Securities Corp.,
Brooklyn, New York, owned approximately 4,029 shares (6.94%).

Directors Compensation
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX+
- --------------------------------------------------------------------------------
<S> <C> <C>
John F. Donahue $ -0- $-0- for the Corporation and
Chairman and Director 56 investment companies in the Fund Complex

Thomas G. Bigley $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex

John T. Conroy, Jr. $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex

William J. Copeland $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex

James E. Dowd $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex

Lawrence D. Ellis, M.D. $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex

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

Edward L. Flaherty, Jr. $1,265 $122,362 for the Corporation and
Director 56 investment companies in the Fund Complex

Peter E. Madden $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex

John E. Murray, Jr. $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex

Wesley W. Posvar $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex

Marjorie P. Smuts $1,149 $111,222 for the Corporation and
Director 56 investment companies in the Fund Complex
- --------------------------------------------------------------------------------
</TABLE>

* Information is furnished for the fiscal year ended November 30, 1997.

# The aggregate compensation is provided for the Corporation, which is
comprised of 8 portfolios.

+ The information is provided for the last calendar year end.

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

Adviser to the Fund

Advisory Fees

For its advisory services, the Adviser receives an annual investment advisory
fee as described in each prospectus. For the fiscal year ended November 30, 1997
and for the period from February 28, 1996 (date of initial public investment) to
November 30, 1996, the Adviser earned $141,895 and $27,135, respectively, all of
which was voluntarily waived.

Other Related Services

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

The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
For the fiscal year ended November 30, 1997 and for the period from February 28,
1996 (date of initial public investment) to November 30, 1996, the Fund paid
$123,241 and $14,206, respectively, in brokerage commissions.

OTHER SERVICES
- --------------------------------------------------------------------------------

Fund Administration

Custodian and Portfolio Accountant

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 upon 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
- --------------------------------------------------------------------------------

Quantity Discounts and Accumulated Purchases

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

Concurrent Purchases

Shareholders have the privilege of combining concurrent purchases of the same
Share class of two or more funds in the Federated Complex in calculating the
applicable sales charge.

Letter of Intent

A Shareholder can sign a letter of intent committing to purchase a certain
amount of the same Share class within a 13month period in order to combine such
purchases in calculating the applicable sales charge. The Fund's custodian will
hold Shares in escrow equal to the maximum applicable sales charge. If the
shareholder completes the commitment, the escrowed Shares will be released to
their account. If the commitment is not completed within 13 months, the
custodian will redeem an appropriate number of escrowed Shares to pay for the
applicable sales charge.

Reinvestment Privilege

The reinvestment privilege is available for all Shares of the Fund within the
same Share Class.

Conversion of Class B Shares

Distribution Plan and Shareholder Services Agreement

For the fiscal year ended November 30, 1997, the Fund's Class B Shares and Class
C Shares paid $27,278 and $3,896, respectively, in distribution services fees,
none of which was waived. Class A Shares have no present intention of paying or
accruing distribution services fees during the fiscal year ending November 30,
1998. In addition, for the fiscal year ended November 30, 1997, the Fund's Class
A Shares, Class B Shares and Class C Shares paid shareholder services fees in
the amounts of $25,082, $9,093 and $1,299, respectively, none of which was
waived.

Conversion to Federal Funds

Purchases by Sales Representatives, Fund Directors, and Employees

The following individuals and their immediate family members may buy Class A
Shares at net asset value without a sales charge:

. Directors, employees, and sales representatives of the Fund, Federated
Global Research, and Federated Securities Corp. and its affiliates;

. Federated Life Members (Class A Shares only);

. any associated person of an investment dealer who has a sales agreement with
Federated Securities Corp.; and

. trusts, pensions, or profit-sharing plans for these individuals.

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

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

Determining Market Value of Securities

Market values of the Fund's portfolio securities, other than options, are
determined as follows:

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

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

. for bonds and other fixed income securities, as determined by an independent
pricing service;

. for all other securities, at fair value as determined in good faith by the
Directors.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: 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

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
prospectus under "Redeeming and Exchanging 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.

Redemption in Kind

Contingent Deferred Sales Charge

Elimination of the Contingent Deferred Sales Charge--Class B Shares

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

The Fund's Tax Status

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

. invest in securities within certain statutory limits; and

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

Foreign Taxes

Shareholders' Tax Status

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 Fund's average annual total returns based on offering price for the
following periods ended November 30, 1997 were:

<TABLE>
<CAPTION>
Share Class Inception Date One-Year Since Inception
- ----------------------------------------------------------
<S> <C> <C> <C>
Class A 2/28/96 11.04% 16.66%
Class B 2/28/96 10.86% 17.13%
Class C 2/28/96 15.48% 19.48%
</TABLE>

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

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

The performance of each of the classes of Shares depends upon such variables as:

. portfolio quality;

. average portfolio maturity;

. type of instruments in which the portfolio is invested;

. changes in interest rates and market value of portfolio securities;

. changes in the Fund's or any class of Shares' expenses; and

. various other factors.

. Standard & Poor's Daily Stock Price Index of 500 Common Stocks (S&P 500), a
composite index of common stocks in industry, transportation, and financial
and public utility companies, can be used to compare to the total returns of
funds whose portfolios are invested primarily in common stocks. In addition,
the S & P 500 assumes reinvestments of all dividends paid by stocks listed
on its index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in the Standard & Poor's figures.

. Lipper Analytical Services, Inc., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and
takes into account any change in net asset value over a specified period of
time. From time to time, the Fund will quote its Lipper ranking in the
"latin american region funds" category in advertising and sales literature.

. Morgan Stanley Capital International World Indices, including, among others,
the Morgan Stanley Capital International Europe, Australia, Far East Index
("EAFE Index"). The EAFE Index is an unmanaged index of more than 1,000
companies of Europe, Australia, and the Far East.

. Morgan Stanley Capital International Latin America Emerging Market Indices,
including the Morgan Stanley Emerging Markets Free Latin America Index
(which excludes Mexican banks and securities companies which cannot be
purchased by foreigners) and the Morgan Stanley Emerging Markets Global
Latin America Index. Both indices include 60% of the market capitalization
of the following countries: Argentina, Brazil, Chile, and Mexico. The
indices are weighted by market capitalization and are calculated without
dividends reinvested.

. Ibbotson Associates International Bond Index, which provides a detailed
breakdown of local market and currency returns since 1960.

. Bear Stearns Foreign Bond Index, which provides simple average returns for
individual countries and GNP-weighted index, beginning in 1975. The returns
are broken down by local market and currency.

. Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

. Financial Times Actuaries Indices--including the FTA-World Index (and
components thereof), which are based on stocks in major world equity
markets.

. CNBC/Financial News Composite Index.

. Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.

. Datastream, InterSec, FactSet, Ibbotson Associates, and Worldscope are
database retrieval services for information including, but not limited to,
international financial and economic data.

. International Financial Statistics, which is produced by the International
Monetary Fund.

. Various publications and annual reports produced by the World Bank and its
affiliates.

. Various publications from the International Bank for Reconstruction and
Development.

. Various publications including, but not limited to, ratings agencies such as
Moody's Investors Service, Inc., Fitch Investors Service, Inc. and Standard
& Poor's Ratings Group.

. Wilshire Associates, which is an on-line database for international
financial and economic data including performance measures for a wide range
of securities.

. International Finance Corporation (IFC) Emerging Markets Data Base, which
provides detailed statistics on stock and bond markets in developing
countries, including IFC market indices.

. Various publications from the Organization for Economic Cooperation and
Development (OECD).

Advertisements may quote performance information which does not reflect the
effect of the sales charge on Class A Shares.

Economic and Market Information

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.

Mutual Fund Market

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

Institutional Clients

* Source: Investment Company Institute

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.

FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

FEDERATED INTERNATIONAL SMALL COMPANY FUND

(A Portfolio of World Investment Series, Inc.)
Class A Shares, Class B Shares, Class C Shares

Prospectus

The shares of Federated International Small Company Fund (the "Fund") represent
interests in a diversified portfolio of World Investment Series, Inc. (the
"Corporation"), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to provide long-term growth of capital. Any
income received from the portfolio is incidental. The Fund pursues its
investment objective by investing primarily in a professionally managed
portfolio of equity securities of foreign companies that have a market
capitalization at the time of purchase of $1.5 billion or less.

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

Prospectus dated January 31, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C>
Summary of Fund Expenses............................. 1
Financial Highlights--Class A Shares................. 2
Financial Highlights--Class B Shares................. 3
Financial Highlights--Class C Shares................. 4
General Information.................................. 5
Investment Information............................... 5
Investment Objective................................ 5
Investment Policies................................. 5
Investment Limitations.............................. 13
Net Asset Value...................................... 14
Investing in the Fund................................ 14
Purchasing Shares.................................... 15
Purchasing Shares Through a Financial Intermediary.. 15
Purchasing Shares by Wire........................... 15
Purchasing Shares by Check.......................... 15
Systematic Investment Program....................... 15
Retirement Plans.................................... 15
Class A Shares...................................... 15
Class B Shares...................................... 16
Class C Shares...................................... 16
Redeeming and Exchanging Shares...................... 16
Redeeming or Exchanging Shares Through a
Financial Intermediary.............................. 16
Redeeming or Exchanging Shares by Telephone......... 17
Redeeming or Exchanging Shares by Mail.............. 17
Requirements for Redemption......................... 17
Requirements for Exchange........................... 17
Systematic Withdrawal Program....................... 17
Contingent Deferred Sales Charge.................... 18
Account and Share Information........................ 18
Confirmations and Account Statements................ 18
Dividends and Distributions......................... 18
Accounts with Low Balances.......................... 18
Corporation Information.............................. 19
Management of the Corporation....................... 19
Distribution of Shares.............................. 20
Distribution Plan and Shareholder Services.......... 20
Other Payments to Financial Institutions............ 20
Administration of the Fund.......................... 21
Brokerage Transactions.............................. 21
Shareholder Information.............................. 21
Tax Information...................................... 21
Federal Income Tax.................................. 21
State and Local Taxes............................... 22
Performance Information.............................. 22
Appendix............................................. 23
</TABLE>

SUMMARY OF FUND EXPENSES

Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).......................................... 5.50% None None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).......................................... None None None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)................................. None 5.50%(3) 1.00%(6)
Redemption Fee (as a percentage of amount redeemed, if applicable)............. None None None
Exchange Fee................................................................... None None None
</TABLE>
Annual Operating Expenses
(As a percentage of average net assets)*
<TABLE>
<S> <C> <C> <C>
Management Fee................................................................ 1.25% 1.25% 1.25%
12b-1 Fee..................................................................... 0.00%(1) 0.75% 0.75%
Total Other Expenses.......................................................... 0.70% 0.70% 0.70%
Shareholder Services Fee.................................................... 0.25% 0.25% 0.25%
Total Operating Expense....................................................... 1.95%(2) 2.70%(4)(5) 2.70%(5)
</TABLE>

(1) Class A Shares have no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending November 30, 1998. 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. For a more complete
description, see "Corporation Information."
(2) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1998. The total
operating expenses were 2.12% for the fiscal year ended November 30, 1997
and would have been 2.33% absent the voluntary waiver of a portion of the
management fee.
(3) The contingent deferred sales charge is 5.50% in the first year declining to
1.00% in the sixth year and 0.00% thereafter. For a more complete
description, see "Contingent Deferred Sales Charge."
(4) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
(5) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1998. The total
operating expenses were 2.87% for the fiscal year ended November 30, 1997
and would have been 3.04% absent the voluntary waiver of a portion of the
management fee.

(6) 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. For a more complete description, see
"Contingent Deferred Sales Charge."
*The total operating expenses are estimated based on average expenses expected
to be incurred during the period ending November 30, 1998. During the course
of this period, expenses may be more or less than the average amount shown.

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Class A Shares, Class B Shares, or
Class C Shares the Fund will bear, either directly or indirectly. For more
complete descriptions of the various costs and expenses, see "Investing in the
Fund" and "Corporation Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
<TABLE>
<CAPTION>
Example Class A Class B Class C
<S> <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.
1 Year................................................................................. $ 74 $ 84 $ 38
3 Years................................................................................ $113 $127 $ 84
5 Years................................................................................ $154 $165 $143
10 Years............................................................................... $270 $284 $303
You would pay the following expenses on the same investment, assuming no redemption.
1 Year................................................................................. $ 27 $ 27
3 Years................................................................................ $ 84 $ 84
5 Years................................................................................ $143 $143
10 Years............................................................................... $284 $303
</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

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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 Period
Ended Ended
November 30, November 30,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 12.26 $ 10.00
Income from investment operations
Net operating loss (0.11) (0.02)
Net realized and unrealized gain on investments and foreign
currency transactions 2.10 2.28
Total from investment operations 1.99 2.26
Net asset value, end of period $ 14.25 $ 12.26
Total return(b) 16.23% 22.60%
Ratios to average net assets
Expenses 2.12% 1.97%*
Net operating loss (1.08%) (0.48%)*
Expense waiver/reimbursement(c) 0.21% 3.38%*
Supplemental data
Net assets, end of period (000 omitted) $91,707 $ 16,399
Average commission rate paid(d) $0.0006 $ 0.0006
Portfolio turnover 286% 174%
</TABLE>

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS--CLASS B SHARES

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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 Period
Ended Ended
November 30, November 30,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 12.20 $ 10.00
Income from investment operations
Net operating loss (0.12) (0.04)
Net realized and unrealized gain on investments and foreign
currency transactions 1.99 2.24
Total from investment operations 1.87 2.20
Net asset value, end of period $ 14.07 $ 12.20
Total return(b) 15.33% 22.00%
Ratios to average net assets
Expenses 2.87% 2.72%*
Net operating loss (1.81%) (1.61%)*
Expense waiver/reimbursement(c) 0.17% 3.38%*
Supplemental data
Net assets, end of period (000 omitted) $120,939 $ 16,721
Average commission rate paid(d) $ 0.0006 $ 0.0006
Portfolio turnover 286% 174%
</TABLE>

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS--CLASS C SHARES

(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 20, 1998, on the Fund's
financial statements for the year ended November 30, 1997, and on the following
table for 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 Period
Ended Ended
November 30, November 30,
1997 1996(a)
<S> <C> <C>
Net asset value, beginning of period $ 12.19 $ 10.00
Income from investment operations
Net operating loss (0.12) (0.05)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.99 2.24
Total from investment operations 1.87 2.19
Net asset value, end of period $ 14.06 $ 12.19
Total return(b) 15.34% 21.90%
Ratios to average net assets
Expenses 2.87% 2.72%*
Net operating loss (1.85%) (1.58%)*
Expense waiver/reimbursement(c) 0.17% 3.38%*
Supplemental data
Net assets, end of period (000 omitted) $27,412 $ 3,040
Average commission rate paid(d) $0.0006 $ 0.0006
Portfolio turnover 286% 174%
</TABLE>

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, DATED NOVEMBER 30, 1997, WHICH CAN BE OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Corporation was incorporated under the laws of the State of Maryland on
January 25, 1994. Class A Shares, Class B Shares, and Class C Shares of the Fund
("Shares") are designed for individuals and institutions seeking long-term
growth of capital by investing primarily in a portfolio of equity securities of
small foreign companies.

The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

Calling the Fund Call the Fund at 1-800-341-7400.

INVESTMENT INFORMATION

Investment Objective

Investment Policies

The Fund pursues its investment objective by investing primarily in a
professionally managed and diversified portfolio of equity securities of small
foreign companies. Under normal market conditions, the Fund intends to invest at
least 65% of its total assets in equity securities of companies that have a
market capitalization at the time of purchase of $1.5 billion or less, where
market capitalization is calculated by multiplying the total number of
outstanding shares of common stock of the company by the market price of the
stock. The Fund applies a U.S. size standard on an international basis.
Therefore, a small company investment outside the U.S. might in some countries
rank among the largest companies in terms of capitalization. These companies
will be located in at least three foreign countries.

The Fund expects to diversify investments in markets outside of the United
States, including markets in Asia, Europe, Latin America, the Indian
subcontinent, the Middle East and Africa. The Fund may invest in regions other
than those defined above if, in the opinion of the Fund's investment adviser,
they offer opportunities to pursue the Fund's investment objective.

Small Capitalization Companies

Small capitalization companies are those companies that have a market
capitalization of $1.5 billion or less at the time of purchase. Small
capitalization companies are positioned for rapid growth in revenues or earnings
and assets, characteristics which may provide for significant capital
appreciation. Small companies often pay no dividends and current income is not a
factor in the selection of stocks. Smaller companies often have limited product
lines, markets, or financial resources, and they may be dependent upon one or a
few key people for management. (See "Risk Considerations of Small Capitalization
Companies").

The Fund has the flexibility to invest in any region of the world. It can invest
in companies based in emerging markets, typically in the Far East, Latin America
and Eastern Europe, as well as in firms operating in developed economies, such
as those of Canada, Japan and Western Europe. The Fund applies a U.S. size
standard on a global basis. Therefore, a small company investment outside the
U.S. might rank above the lowest 20% by market capitalization in local markets
and, in fact, might in some countries rank among the largest companies in terms
of capitalization.

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

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

Debt Securities

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

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

Convertible Securities

Convertible securities include a spectrum of securities which can be exchanged
for or converted into common stock. Convertible securities may include, but are
not limited to: convertible bonds or debentures; convertible preferred stock;
units consisting of usable bonds and warrants; or securities which cap or
otherwise limit returns to the convertible security holder, such as DECS--
(Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock when
issued as a debt security), LYONS--(Liquid Yield Option Notes, which are
corporate bonds that are purchased at prices below par with no coupons and are
convertible into stock), PERCS--(Preferred Equity Redemption Cumulative Stock,
an equity issue that pays a high cash dividend, has a cap price and mandatory
conversion to common stock at maturity), and PRIDES--(Preferred Redeemable
Increased Dividend Securities, which are essentially the same as DECS; the
difference is little more than who initially underwrites the issue).

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by a
nationally recognized statistical rating organization ("NRSRO") or in the Fund
holding such securities where they have acquired a rating below investment grade
after the Fund has purchased it.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

Please see "Risk Factors Relating to Investing in High Yield Securities."

Investing in Securities of Other Investment Companies

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 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 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.

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

Forward Commitments

Foreign Currency Transactions
The Fund will enter into foreign currency transactions to obtain the necessary
currencies to settle securities

transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts.

Forward Foreign Currency Exchange Contracts

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.

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 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 indices that reflect
the market value of securities of the firms included in the indices. An index
futures contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the differences between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written.

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

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

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

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

Risk Characteristics of Foreign Securities

Currency Risks

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").

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 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

Risk Considerations of Small Capitalization Companies

There is typically less publicly available information concerning foreign and
smaller companies than for domestic and larger, more established companies. Some
small companies have limited product lines, distribution channels and financial
and managerial resources. Also, because smaller companies normally have fewer
shares outstanding than larger companies and trade less frequently, it may be
more difficult for the Fund to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices. Some of the companies
in which the Fund may invest may distribute, sell or produce products which have
recently been brought to market and may be dependent on key personnel with
varying degrees of experience.

As with other mutual funds that invest primarily in equity securities, the Fund
is subject to market risks. That is, the possibility exists that common stocks
will decline over short or even extended periods of time. However, because the
Fund invests primarily in small capitalization stocks, there are some additional
risks factors associated with investments in the Fund. In particular, stocks in
the small capitalization sector may be more volatile in price than larger
capitalization stocks. This is because, among other things, small companies have
less certain growth prospects than larger companies; have a lower degree of
liquidity in the equity market; and tend to have a greater sensitivity to
changing economic conditions. Further, in addition to exhibiting greater
volatility, the stocks of small companies may, to some degree, fluctuate
independently of the stocks of large companies. That is, the stocks of small
companies may decline in price as the prices of large company stocks rise or
vice versa. Therefore, investors should expect that the Fund will be more
volatile than, and may fluctuate independently of broad stock market indices.

Risk Considerations in Emerging Markets

Risk Factors Relating to Investing in
High Yield Securities

Portfolio Turnover

Investment Limitations
The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the characteristics
described below.

<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C>
Minimum and
Subsequent
Investment Amounts $1500/$100 $1500/$100 $1500/$100
Minimum and
Subsequent
Investment Amount
for Retirement Plans $ 250/$100 $ 250/$100 $ 250/$100
Maximum Sales Charge 5.50%* None None
Maximum Contingent
Deferred Sales Charge** None 5.50%+ 1.00%#
Conversion Feature No Yes++ No
</TABLE>

* Class A Shares are sold at NAV, plus a sales charge as follows:

<TABLE>
<CAPTION>
Sales Charge Dealer
as a Percentage of Concession as
Public Net a Percentage of
Offering Amount Public Offering
Amount of Transaction Price Invested 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>

Class B Shares:

<TABLE>
<CAPTION>
Year of Redemption Contingent 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 B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase. See "Conversion of Class B
Shares."
# The contingent deferred sales charge is assessed on Shares redeemed within
one year of their purchase date.

PURCHASING SHARES

In connection with any sale, Federated Securities Corp. may, from time to time,
offer certain items of nominal value to any shareholder or investor.

Purchasing Shares Through a Financial Intermediary

Purchasing Shares by Wire

Purchasing Shares by Check

Systematic Investment Program

Retirement Plans
Fund Shares can be purchased as an investment for retirement plans or Individual
Retirement Accounts ("IRA"). For further details, contact the Fund and consult a
tax adviser.

Class A Shares
Class A Shares are sold at NAV, plus a sales charge. However:

No sales charge is imposed for Class A Shares purchased:

. through financial intermediaries that do not receive sales charge dealer
concessions;

. by Federated Life Members; or

. through "wrap accounts" or similar programs under which clients pay a fee for
services.

In addition, the sales charge can be reduced or eliminated by:

. purchasing in quantity and accumulating purchases at the levels in the table
under "Investing in the Fund";

. combining concurrent purchases of two or more funds;

. signing a letter of intent to purchase a specific quantity of shares within
13 months; or

. using the reinvestment privilege.

Dealer Concession

Class B Shares

Conversion of Class B Shares

Class C Shares

Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00% will
be charged on assets redeemed within the first full 12 months following
purchase.

REDEEMING AND EXCHANGING SHARES

Redeeming or Exchanging Shares Through a Financial Intermediary

Redeeming or Exchanging Shares by Telephone

Redeeming or Exchanging Shares by Mail

Requirements for Redemption

Requirements for Exchange

Systematic Withdrawal Program

Contingent Deferred Sales Charge

Eliminating the Contingent Deferred Sales Charge
Upon written notification to Federated Securities Corp. or the transfer agent,
no contingent deferred sales charge will be imposed on redemptions:

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

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

. which are involuntary redemptions of shareholder accounts that do not comply
with the minimum balance requirements;

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

. which are reinvested in the Fund under the reinvestment privilege;

ACCOUNT AND SHARE INFORMATION

Confirmations and Account Statements

Dividends and Distributions

Accounts with Low Balances

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 Federated Global Research Corp.,
the Fund's investment adviser (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.

Advisory Fees

Adviser's Background

Federated Global Research Corp., incorporated in Delaware on May 12, 1995, is a
registered investment adviser under the Investment Advisers Act of 1940. It is
a subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the Trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Prior to September 1995, the Adviser had not served as an
investment adviser to mutual funds.

Federated Global Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $120 billion invested across more
than 300 funds under management and/or administration by its subsidiaries, as
of December 31, 1997, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through approximately $4,000
financial institutions nationwide.

Drew J. Collins has been the Fund's portfolio manager 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 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 Wharton School of the University of Pennsylvania.

Tracy P. Stouffer has been the Fund's portfolio manager since its inception.
Ms. Stouffer joined Federated Investors in 1995 as a Vice President of the
Fund's investment adviser. Ms. Stouffer served as Vice President/Portfolio
Manager of international equity funds at Clariden Asset Management (NY) Inc.
from 1988 to 1995. Ms. Stouffer is a Chartered Financial Analyst and received
her M.B.A. in marketing from the University of Western Ontario, Canada.

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

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25% of the average daily NAV 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.

Other Payments to Financial Institutions

Furthermore, with respect to Class A Shares, Class B Shares, and Class C Shares,
Federated Securities Corp. and Federated Shareholder Services may offer to pay a
fee from their own assets to financial institutions as financial assistance for
providing substantial 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

Brokerage Transactions

SHAREHOLDER INFORMATION

As of January 7, 1998, the following shareholders of record owned 25% or more of
the outstanding Shares of the Fund: Charles Schwab & Co., Inc. (as record owner
holding Class A Shares for its clients), owned approximately 1,778,043 Class A
Shares (26.23%), and Merrill Lynch Pierce Fenner & Smith (as record owner
holding Class C Shares for its clients), owned approximately 991,486 Class C
Shares (49.81)% 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.

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.

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

State and Local Taxes

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.

The yield of each class of Shares is calculated by dividing the net investment
income per Share (as defined by the SEC) 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.

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.

APPENDIX

Standard and Poor's Ratings Services
Long-Term Debt Rating Definitions

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

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

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

Moody's Investors Service, Inc.
Long-Term Bond Rating Definitions

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.