WORLD INVESTMENT SERIES INC, 485APOS, 1999-02-01

WORLD INVESTMENT SERIES INC
485APOS, 1999-02-01

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1933 Act File No. 33-52149
1940 Act File No. 811-7141

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. .............................

Post-Effective Amendment No. 17 ............................. X
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and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
------

Amendment No. 18 ............................................ X
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WORLD INVESTMENT SERIES, INC.

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
on ________________ pursuant to paragraph (b)(1)(v)
X 60 days after filing pursuant to paragraph (a) (i)
pursuant to paragraph (a) (i)
75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies to:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037

Prospectus

FEDERATED ASIA PACIFIC GROWTH FUND

A Portfolio of World Investment Series, Inc.

class a shares
class b shares
class c shares

A mutual fund seeking long-term growth of capital by investing primarily in
equity securities of Asian and Pacific Rim companies.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

Contents
Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Fund?
Financial Information

march __, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide long-term growth of capital. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment strategies and policies described
in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing at least 65% of its
assets in equity securities of companies located in Asia and the Pacific Rim.
The adviser intends to focus its investments in the most developed capital
markets of Asia and the Pacific Rim.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

o investing in smaller, developing capital markets in Asian and Pacific Rim
countries,

o fluctuations in the value of equity securities in foreign securities
markets, and

o fluctuations in the exchange rate between the U.S. dollar and foreign
currencies.

An investment in the Fund involves additional risks such as risks of foreign
investing.

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 or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

Risk/Return Bar Chart and Table
| Federated Asia Pacific Growth Fund

[The graphic presentation displayed here consists of a bar chart representing
the annual total returns of Class A Shares of Federated Asia Pacific Growth Fund
as of the calendar year-end for each of two years. The `y' axis reflects the "%
Total Return" beginning with "-30.00%" and increasing in increments of 5.00% up
to 0.00%. The `x' axis represents calculation periods from the earliest calendar
year end of the Fund's start of business through the calendar year ended
December 31, 1998. The light gray shaded chart features two distinct vertical
bars, each shaded in charcoal, and each visually representing by height the
total return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class A Shares for each calendar year
is stated directly at the bottom of each respective bar, for the calendar years
1997 through1998. The percentages notes are: -26.97 and -7.36%, respectively.]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a year-end basis. The Fund's Class A Shares are sold subject to a sales
charge (load). The impact of the sales charges are not reflected in the total
returns above, and if these amounts were reflected, returns would be less than
those shown. Within the period shown in the Chart, the Fund's Class A Shares
highest quarterly return was 20.57% (quarter ended December 31, 1998). Its
lowest quarterly return was -25.30% (quarter ended December 31, 1997).

<PAGE>

Average Annual Total Return
Calendar Period Class A Class B Class C MSCI-AP
1 Year -7.36% -7.99% -7.70% %
Life of the Fund1 -12.68% -13.23% -13.09% %

1 The Fund's Class A, Class B and Class C Shares start of performance date was
February 28, 1996.

The table shows the Fund's Class A, Class B and Class C Shares average annual
total returns compared to the Morgan Stanley Capital International Asia Pacific
Index (MSCI-AP). The MSCI-AP is a market value-weighted average of the
performance of securities listed in the stock exchanges of 14 countries.

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

federated asia pacific growth fund

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's Class A, B, or C Shares.

Shareholder Fees
Fees Paid Directly From Your Investment Class A Class B Class C
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering 5.50% None None
price)
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase 0.00% 5.50% 1.00%
price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other None None None
Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None

Annual Fund Operating Expenses (Before Reimbursements/Waivers)(1)
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management Fee(2) 1.10% 1.10% 1.10%
Distribution (12b-1) Fee(3) 0.25% 0.75% 0.75%
Shareholder Services Fee 0.25% 0.25% 0.25%
Other Expenses(4) 4.53% 4.53% 4.53%
Total Annual Fund Operating Expenses 5.88% 6.38%(5) 6.38%
1 Although not contractually obligated to do so, the adviser will waive and
distributor will reimburse certain amounts. These are shown below along
with the net expenses the Fund would actually pay for the fiscal year
ending November 30, 1998.
Reimbursements/Waivers of Fund Expenses 4.03% 3.78% 3.78%
Total Actual Annual Fund Operating Expenses (after reimbursements/waivers) 1.85% 2.60% 2.60%
</TABLE>

2 The adviser voluntarily waived a portion of the management fee. The adviser
can terminate this voluntary waiver at any time. The management fee paid by
the Fund (after the voluntary waiver) was 0.00% for the year ended November
30, 1998.

3 Class A Shares did not pay or accrue the distribution (12b-1) fee during
the fiscal year ended November 30, 1998. Class A Shares have no present
intention of paying or accruing the distribution (12b-1) fee during the
year ended November 30, 1999.

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

<PAGE>

Example

The following Example is intended to help you compare the cost of investing in
the Fund's Class A Shares, Class B Shares and Class C Shares with the cost of
investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund's Class A, Class B, and
Class C Shares for the time periods indicated and then redeem all of your shares
at the end of those periods. Expenses assuming no redemption are also shown. The
Example also assumes that your investment has a 5% return each year and that the
Fund's Class A, Class B, and Class C Shares operating expenses are before
reimbursements/waivers as shown in the Table and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

Share Class 1 Year 3 Years 5 Years 10 Years
Class A Shares
Expenses assuming redemption $1,103 $2,195 $3,268 $5,868
Expenses assuming no redemption $1,103 $2,195 $3,268 $5,868
Class B Shares
Expenses assuming redemption $1,176 $2,258 $3,268 $5,874
Expenses assuming no redemption $634 $1,875 $3,082 $5,874
Class C Shares
Expenses assuming redemption $732 $1,875 $3,082 $5,957
Expenses assuming no redemption $634 $1,875 $3,082 $5,957
</TABLE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

In selecting countries in which to invest, the adviser reviews the county's
economic outlook, including its interest and inflation rates, and the political
and foreign exchange risk of investing in a particular country. The adviser uses
the Morgan Stanley Asia Pacific Free Index (Index) as a benchmark in selecting
the weightings of countries contained in the portfolio. The adviser may deviate
from the country weightings in the Index when it believes that performance may
be enhanced by doing so. The adviser then analyzes companies located in each
particular country.

In selecting investments for the portfolio the adviser looks for companies which
are positioned for rapid growth in revenues or earnings and assets. The adviser
evaluates the quality of each company's management, its market share in domestic
and export markets, and the uniqueness of its product line. The adviser may also
meet with company representatives, company suppliers, customers, or competitors.
Based on this information, the adviser evaluates the sustainability of the
company's current growth trends and potential catalysts for increased growth.
Using this type of fundamental analysis, the adviser tries to select securities
that offer the best potential returns consistent with its general portfolio
strategy.

Portfolio Turnover

The Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the Fund to have an increased
portfolio turnover rate, which is likely to generate shorter-term gains (losses)
for its shareholders, which are taxed at a higher rate than longer-term gains
(losses). Actively trading portfolio securities increases the Fund's trading
costs and may have an adverse impact the Fund's performance.

Temporary Defensive Investments

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

Asian and Pacific Rim Foreign Securities
The Fund considers an issuer to be an Asian or Pacific Rim company if:

o........it is organized under the laws of, or has a principal office located
in, an Asian or Pacific Rim country;

o the principal trading market for its securities is in an Asian or Pacific
Rim country; or

o it (or its subsidiaries) derived in its most current fiscal year at least
50% of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in an Asian or Pacific Rim
country.

Asian and Pacific Rim securities are often denominated in foreign currencies.
Along with the risks normally associated with domestic equity securities, Asian
and Pacific Rim securities are subject to currency risks and risks of foreign
investing.

Depositary Receipts

Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary
Receipts (IDRs), are traded globally or outside the United States. Depositary
receipts involve many of the same risks of investing directly in foreign
securities, including currency risks and risks of foreign investing.

Foreign Exchange Contracts

In order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received from the sale of a foreign
security into U.S. dollars, the Fund may enter into spot currency trades. In a
spot trade, the Fund agrees to exchange one currency for another at the current
exchange rate. The Fund may also enter into derivative contracts in which a
foreign currency is an underlying asset. The exchange rate for currency
derivative contracts may be higher or lower than the spot exchange rate. Use of
these derivative contracts may increase or decrease the Fund's exposure to
currency risks.

Equity Securities

Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the principal types of equity securities in which the Fund
invests.

Common Stocks

Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings
directly influence the value of its common stock.

Preferred Stocks

Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock.

Interests in Other Limited Liability Companies

Entities such as limited partnerships, limited liability companies,
business trusts and companies organized outside the United States may issue
securities comparable to common or preferred stock.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

Currency Risks

Stock Market Risks

o The value of equity securities in the Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The
Fund's portfolio will reflect changes in prices of individual portfolio
stocks or general changes in stock valuations. Consequently, the Fund's
share price may decline and you could lose money.

o The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company. However, diversification will not protect the Fund
against widespread or prolonged declines in the stock market.

Risks of Foreign Investing

o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable that those of the United States.
Foreign financial markets may also have fewer investor protections.
Securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S. investors.

o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than United
States companies by market analysts and the financial press. In addition,
foreign countries may lack uniform accounting, auditing and financial
reporting standards or regulatory requirements comparable to those
applicable to U.S. companies. These factors may prevent the Fund and its
adviser from obtaining information concerning foreign companies that is as
frequent, extensive and reliable as the information available concerning
companies in the United States.

o Foreign countries may have restrictions on foreign ownership of securities
or may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.

Emerging Market Risks

o Securities issued or traded in emerging markets generally entail greater
risks than securities issued or traded in developed markets. For example,
their prices can be significantly more volatile than prices in developed
countries. Emerging market economies may also experience more severe
downturns (with corresponding currency devaluations) than developed
economies.

o 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.

Regional Risks

o Certain risks associated with international investments and investing in
smaller, developing capital markets are heightened for investments in Asian
and Pacific Rim countries. For example, some of the currencies of Asian and
Pacific Rim countries have experienced steady devaluations relative to the
U.S. dollar, and major adjustments have been made in certain of these
currencies periodically.

o Although there is a trend toward less government involvement in commerce,
governments of many Asian and Pacific Rim countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government still owns or controls many
companies, including some of the largest in the country. Accordingly,
government actions in the future could have a significant effect on
economic conditions in Asian and Pacific Rim countries, which could affect
private sector companies and the Fund, as well as the value of securities
in the Fund's portfolio.

Liquidity Risks

o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, the Fund may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on the
Fund's performance. Infrequent trading of securities may also lead to an
increase in their price volatility.

WHAT DO SHARES COST?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form,
it is processed at the next calculated net asset value (NAV), plus any
applicable front-end sales charge (public offering price).

NAV is determined at the end of regular trading (normally 4 p.m. Eastern time)
each day the NYSE is open. The Fund's current NAV and public offering price may
be found in the mutual funds section in local newspapers under "Federated" and
the appropriate class designation listing.

The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.

Maximum Sales Charge
Contingent
Minimum Initial/Subsequent Front-End Sales Deferred Sales
Shares Offered Investment Amounts1 Charge2 Charge3
Class A $1,500/$100 5.50% 0.00%
Class B $1,500/$100 None 5.50%
Class C $1,500/$100 None 1.00%

Orders for $250,000 or more will be invested in Class A Shares instead of Class
B Shares to maximize your return and minimize the sales charges and marketing
fees. Accounts held in the name of an investment professional may be treated
differently. Class B Shares will automatically convert into Class A Shares after
eight full years from the purchase date. This conversion is a non-taxable event.
2 Front-End Sales Charge is expressed as a percentage of public offering price.
See "Sales Charge When You Purchase" below. 3 See "Sales Charge When You Redeem"
below.

<PAGE>

SALES CHARGE WHEN YOU PURCHASE
Class A Shares

<PAGE>

Sales Charge as a Sales Charge as a
Purchase Amount Percentage of Public Percentage of NAV
Offering Price
Less than $50,000 5.50% 5.82%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or greater1 0.00% 0.00%
</TABLE>

1 A contingent deferred sales charge of 0.75% of the redemption amount
applies to Class A Shares redeemed up to 24 months after purchase under
certain investment programs where an investment professional received an
advance payment on the transaction.

The sales charge at purchase may be reduced or eliminated by:

o purchasing Shares in greater quantities to reduce the applicable sales
charge;

o combining concurrent purchases of Shares:

- - by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Federated Funds
(other than money market funds);

o accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still
invested in the Fund); or

o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

The sales charge will be eliminated when you purchase Shares:

o within 120 days of redeeming Shares of an equal or lesser amount;

o by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);

o through wrap accounts or other investment programs where you pay the
investment professional directly for services;

o through investment professionals that receive no portion of the sales
charge;

o as a Federated Life Member (Class A Shares only) and their immediate family
members; or

o as a Director or employee of the Fund, the Adviser, the Distributor and
their affiliates, and the immediate family members of these individuals.

If your investment qualifies for a reduction or elimination of the sales charge,
you or your investment professional should notify the Fund's Distributor,
Federated Securities Corp., at the time of purchase. If the Distributor is not
notified, you will receive the reduced sales charge only on additional
purchases, and not retroactively on previous purchases.

<PAGE>

SALES CHARGE WHEN YOU REDEEM

Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).

Class A Shares

A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase under certain investment
programs where an investment professional received an advance payment on the
transaction.

Class B Shares
Shares Held Up To: CDSC
1 year 5.50%
2 years 4.75%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 years or more 0.00%

Class C Shares
You will pay a 1% CDSC if you redeem Shares within one year
of the purchase date.

You Will Not be Charged a CDSC When Redeeming Shares: o purchased with
reinvested dividends or capital gains;

o purchased within 120 days of redeeming Shares of an equal or lesser amount;

o that you exchanged into the same share class of another Federated Fund
where the shares were held for the applicable CDSC holding period (other
than a money market fund);

o purchased through investment professionals that did not receive advanced
sales payments; or

o if after you purchase Shares, you become disabled as defined by the IRS.

In addition, you will not be charged a CDSC:

o if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;

o if your redemption is a required retirement plan distribution;

o upon the death of the last surviving shareholder of the account.

If your redemption qualifies, you or your investment professional should notify
the Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.

To keep the sales charge as low as possible, the Fund redeems your Shares in
this order:

o Shares that are not subject to a CDSC;

o Shares held the longest (to determine the number of years your Shares
have been held, include the time you held shares of other Federated
Funds that have been exchanged for Shares of this Fund); and

o then, the CDSC is calculated using the share price at the time of
purchase or redemption, whichever is lower.

HOW IS THE FUND SOLD?

The Fund offers three share classes: Class A Shares, Class B Shares, and Class C
Shares, each representing interests in a single portfolio of securities.

The Fund's Distributor markets the Shares described in this prospectus to
institutions or individuals, directly or through investment professionals. When
the Distributor receives sales charges and marketing fees, it may pay some or
all of them to investment professionals. The Distributor and its affiliates may
pay out of their assets other amounts (including items of material value) to
investment professionals for marketing and servicing Shares. The Distributor is
a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing
fees to the Distributor and investment professionals for the sale, distribution
and customer servicing of the Fund's Shares. Because these Shares pay marketing
fees on an ongoing basis, your investment cost may be higher over time than
other shares with different sales charges and marketing fees.

HOW TO PURCHASE SHARES

You may purchase Shares through an investment professional, directly from
the Fund, or through an exchange from another Federated Fund. The Fund reserves
the right to reject any request to purchase or exchange Shares.

Where the Fund offers more than one Share Class and you do not specify the
Class choice on your New Account Form or form of payment (e.g., Federal Reserve
wire or check), you automatically will receive Class A Shares.

THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and

o Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4 p.m. Eastern time). You will
receive the next calculated NAV if the investment professional forwards the
order to the Fund on the same day and the Fund receives payment within
three business days. You will become the owner of Shares and receive
dividends when the Fund receives your payment.

Investment professionals should send payments according to the instructions
in the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

o Establish your account with the Fund by submitting a completed New Account
Form; and

o Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

By Wire
Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

By Check

Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:

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

If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:

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

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM

Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or by contacting the Fund or your investment
professional.

BY AUTOMATED CLEARINGHOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

RETIREMENT INVESTMENTS

You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.

<PAGE>

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

o through an investment professional if you purchased Shares through an
investment professional; or

o directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions. If you call
before the end of regular trading on the NYSE (normally 4 p.m. Eastern time) you
will receive a redemption amount based on that day's NAV.

By Mail

You may redeem or exchange Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed or exchanged;

o signatures of all Shareholders exactly as registered; and

o if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

Signature Guarantees
Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last thirty days;

o a redemption is payable to someone other than the shareholder(s) of record;
or

o if exchanging (transferring) into another fund with a different shareholder
registration.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:

o an electronic transfer to your account at a financial institution that is
an ACH member; or

o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.

Redemption in Kind

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

REDEMPTIONS FROM RETIREMENT ACCOUNTS

In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.

EXCHANGE PRIVILEGES

You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

The Fund may modify or terminate the exchange privilege at any time. The
Fund's management or investment adviser may determine from the amount, frequency
and pattern of exchanges that a shareholder is engaged in excessive trading that
is detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

You may automatically redeem or exchange Shares in a minimum amount of $100
on a regular basis. Complete the appropriate section of the New Account Form or
an Account Service Options Form or contact your investment professional or the
Fund. Your account value must meet the minimum initial investment amount at the
time the program is established. This program may reduce, and eventually
deplete, your account. Payments should not be considered yield or income.
Generally, it is not advisable to continue to purchase Shares subject to a sales
charge while redeeming Shares using this program.

Systematic Withdrawal Program (SWP) On Class B Shares
You will not be charged a CDSC on SWP redemptions if:

o you redeem 12% or less of your account value in a single year;

o your account is at least one year old;

o you reinvest all dividends and capital gains distributions; and

o your account has at least a $10,000 balance when you establish the SWP.
(You cannot aggregate multiple Class B Share accounts to meet this minimum
balance).

You will be subject to a CDSC on redemption amounts that exceed the 12% annual
limit. In measuring the redemption percentage, your account is valued when you
establish the SWP and then annually at calendar year-end. You can redeem only at
a rate of 1% monthly, 3% quarterly, or 6% semi-annually.

ADDITIONAL CONDITIONS

Telephone Transactions

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

Share Certificates

The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares and pays any dividends annually to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date. The record
date is the date on which a shareholder must officially own shares in order to
earn a dividend.

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be primarily capital gains. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.

WHO MANAGES THE FUND?

The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Global Investment Management Corp. (formerly, Federated
Global Research Corp.). The Adviser manages the Fund's assets, including buying
and selling portfolio securities. The Adviser's address is 175 Water Street, New
York, NY 10038-4965.

The Fund's portfolio managers are:

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.

Drew J. Collins has been the Fund's portfolio manager since its inception . Mr.
Collins joined Federated Investors, Inc. 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. The Adviser
and other subsidiaries of Federated advise approximately 200 mutual funds and
separate accounts, which total more than $110 billion in assets as of December
31, 1998. Federated was established in 1955 and is one of the largest mutual
fund investment managers in the United States with approximately 1,900
employees. More than 4,000 investment professionals make Federated Funds
available to their customers.

Advisory Fees

The Adviser receives an annual investment advisory fee of 1.10% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

Year 2000 Readiness

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999. The Year 2000 problem may cause systems to process information incorrectly
and could disrupt businesses that rely on computers, like the Fund.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.

However, this may be difficult with certain issuers. For example, funds dealing
with foreign service providers or investing in foreign securities, will have
difficulty determining the Year 2000 readiness of those entities. This is
especially true of entities or issuers in emerging markets.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of all dividends and capital
gains.

This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.

<PAGE>

FEDERATED ASIA PACIFIC GROWTH FUND

A Portfolio of World Investment Series, Inc.

class a shares
class b shares
class c shares

A Statement of Additional Information (SAI) dated March __, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Fund's annual and semi-annual reports to
shareholders as they become available. The annual report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the annual report,
semi-annual report and other information without charge, call your investment
professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

Investment Company Act File No. 811-7141
Cusip 981487507
981487606
981487705
G01470-02 (3/99)

Statement of Additional Information

FEDERATED ASIA PACIFIC GROWTH FUND

A Portfolio of World Investment Series, Inc.

Class a shares
class b shares
class c shares

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Asia Pacific Growth Fund
(Fund) and Class A, B and C Shares, dated March __, 1999. This SAI incorporates
by reference the Fund's Annual Report. Obtain the prospectus or the Annual
Report without charge by calling 1-800-341-7400.

march __, 1999

Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 981487507
981487606
981487705

G01470-03 (3/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of World Investment Series, Inc.
(Corporation). The Corporation is an open-end, management investment company
that was established under the laws of the State of Maryland on January 25,
1994. The Corporation may offer separate series of shares representing interests
in separate portfolios of securities.

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

Following is a table that indicates which types of securities are a:
o P = Principal investment of the Fund; (shaded in chart) or
o A = Acceptable (but not principal) investment of the Fund.

-------------------------------------------------- --------------
Securities Fund
-------------------------------------------------- --------------
American Depositary Receipts P
-------------------------------------------------- --------------
--------------------------------------------------
Borrowing A
--------------------------------------------------
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Common Stock P
--------------------------------------------------
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Common Stock of Foreign Companies P
-------------------------------------------------- --------------
--------------------------------------------------
Convertible Securities A
-------------------------------------------------- --------------
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Debt Obligations A
-------------------------------------------------- --------------
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Derivative Contracts and Securities A
--------------------------------------------------
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European Depositary Receipts P
-------------------------------------------------- --------------
--------------------------------------------------
Foreign Currency Hedging Transactions A
--------------------------------------------------
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Foreign Currency Transactions P
--------------------------------------------------
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Foreign Securities P
-------------------------------------------------- --------------
--------------------------------------------------
Forward Commitments, When-Issued and Delayed A
Delivery Transactions
--------------------------------------------------
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Futures and Options Transactions A
-------------------------------------------------- --------------
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Global Depositary Receipts P
-------------------------------------------------- --------------
--------------------------------------------------
Illiquid and Restricted Securities A
-------------------------------------------------- --------------
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Lending of Portfolio Securities A
--------------------------------------------------
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Preferred Stocks P
-------------------------------------------------- --------------
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Repurchase Agreements A
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Reverse Repurchase Agreements A
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Securities of Other Investment Companies A
-------------------------------------------------- --------------
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SWAP Transactions A
-------------------------------------------------- --------------
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U.S. Government Securities A
-------------------------------------------------- --------------
-------------------------------------------------- --------------
Warrants A
-------------------------------------------------- --------------

SECURITIES DESCRIPTIONS AND TECHNIQUES

Foreign Securities

Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in,
another country;

o the principal trading market for its securities is in another country; or

Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.

Depositary Receipts

Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are traded in the United States. ADRs provide a
way to buy shares of foreign-based companies in the United States rather
than in overseas markets. ADRs are also traded in U.S. dollars, eliminating
the need for foreign exchange transactions. The foreign securities
underlying European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs), and International Depositary Receipts (IDRs), are traded globally
or outside the United States. Depositary receipts involve many of the same
risks of investing directly in foreign securities, including currency risks
and risks of foreign investing.

Foreign Exchange Contracts

In order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received from the sale of a
foreign security into U.S. dollars, the Fund may enter into spot currency
trades. In a spot trade, the Fund agrees to exchange one currency for
another at the current exchange rate. The Fund may also enter into
derivative contracts in which a foreign currency is an underlying asset.
The exchange rate for currency derivative contracts may be higher or lower
than the spot exchange rate. Use of these derivative contracts may increase
or decrease the Fund's exposure to currency risks.

Foreign Government Securities

Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations
of supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies. Examples of these include, but are not limited to, the
International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank, the European Investment Bank and the Inter-American
Development Bank.

Foreign government securities also include fixed income securities of
quasi-governmental agencies that are either issued by entities owned by a
national, state or equivalent government or are obligations of a political
unit that are not backed by the national government's full faith and
credit. Further, foreign government securities include mortgage-related
securities issued or guaranteed by national, state or provincial
governmental instrumentalities, including quasi-governmental agencies.

Equity Securities

Equity securities represent a share of an issuer's earnings and assets,
after the issuer pays its liabilities. The Fund cannot predict the income
it will receive from equity securities because issuers generally have
discretion as to the payment of any dividends or distributions. However,
equity securities offer greater potential for appreciation than many other
types of securities, because their value increases directly with the value
of the issuer's business. The following describes the types of equity
securities in which the Fund invests.

Common Stocks

Preferred Stocks

Interests in Other Limited Liability Companies

Entities such as limited partnerships, limited liability companies,
business trusts and companies organized outside the United States may issue
securities comparable to common or preferred stock.

Warrants

Warrants give the Fund the option to buy the issuer's equity securities at
a specified price (the exercise price) at a specified future date (the
expiration date). The Fund may buy the designated securities by paying the
exercise price before the expiration date. Warrants may become worthless if
the price of the stock does not rise above the exercise price by the
expiration date. This increases the market risks of warrants as compared to
the underlying security. Rights are the same as warrants, except companies
typically issue rights to existing stockholders.

Fixed Income Securities

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the types of fixed income securities in which the Fund
invests.

Treasury Securities

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

Convertible Securities

Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.

Derivative Contracts

Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.

For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.

The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.

Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity risks. OTC contracts
also expose the Fund to credit risks in the event that a counterparty defaults
on the contract.

<PAGE>

The Fund may trade in the following types of derivative contracts.

Futures Contracts

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. Futures contracts traded OTC are
frequently referred to as forward contracts.

The Fund may buy or sell the following types of futures contracts: foreign
currency, securities and securities indices.

Options

The Fund may:

o Buy call options on foreign currencies, securities, securities indices
and futures contracts involving these items to manage interest rate
and currency risks; and

o Buy put options on foreign currencies, securities, securities indices
and futures contracts involving these items to manage interest rate
and currency risks.

The Fund may also write covered call options and secured put options on
securities to generate income from premiums and lock in gains. 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 a risk that the Fund may be required
to take delivery of the underlying asset when its current market price is lower
than the exercise price.

When the Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.

Swaps

Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most
swaps do not involve the delivery of the underlying assets by either party, and
the parties might not own the assets underlying the swap. The payments are
usually made on a net basis so that, on any given day, the Fund would receive
(or pay) only the amount by which its payment under the contract is less than
(or exceeds) the amount of the other party's payment. Swap agreements are
sophisticated instruments that can take many different forms, and are known by a
variety of names including caps, floors, and collars. Common swap agreements
that the Fund may use include:

Interest Rate Swaps

Interest rate swaps are contracts in which one party agrees to make regular
payments equal to a fixed or floating interest rate times a stated principal
amount of fixed income securities, in return for payments equal to a different
fixed or floating rate times the same principal amount, for a specific period.
For example, a $10 million LIBOR swap would require one party to pay the
equivalent of the London Interbank Offer Rate of interest (which fluctuates) on
$10 million principal amount in exchange for the right to receive the equivalent
of a stated fixed rate of interest on $10 million principal amount.

Currency Swaps

Currency swaps are contracts which provide for interest payments in different
currencies. The parties might agree to exchange the notional principal amount as
well.

Caps and Floors

Caps and Floors are contracts in which one party agrees to make payments only if
an interest rate or index goes above (Cap) or below (Floor) a certain level in
return for a fee from the other party.

Hybrid Instruments

Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of the
interest or principal payable on a hybrid security is determined by reference to
changes in the price of an underlying asset or by reference to another benchmark
(such as interest rates, currency exchange rates or indices). Hybrid instruments
also include convertible securities with conversion terms related to an
underlying asset or benchmark.

The risks of investing in hybrid instruments reflect a combination of the risks
of investing in securities, options, futures and currencies, and depend upon the
terms of the instrument. Thus, an investment in a hybrid instrument may entail
significant risks in addition to those associated with traditional fixed income
or convertible securities. Hybrid instruments are also potentially more volatile
and carry greater market risks than traditional instruments.

Special Transactions

Repurchase Agreements

Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

Reverse Repurchase Agreements

Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

Delayed Delivery Transactions

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create market
risks for the Fund. Delayed delivery transactions also involve credit risks in
the event of a counterparty default.

Securities Lending

The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to
the borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on
loan, but it will terminate a loan in anticipation of any important vote.
The Fund may pay administrative and custodial fees in connection with a
loan and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.

Securities lending activities are subject to market risks and credit risks.

Asset Coverage

In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

Hedging

Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may attempt to lower the cost of hedging by entering into transactions that
provide only limited protection, including transactions that (1) hedge only a
portion of its portfolio, (2) use derivatives contracts that cover a narrow
range of circumstances or (3) involve the sale of derivatives contracts with
different terms. Consequently, hedging transactions will not eliminate risk even
if they work as intended. In addition, hedging strategies are not always
successful, and could result in increased expenses and losses to the Fund.

Investment Ratings for Investment Grade Securities

The Adviser will determinate whether a security is investment grade based upon
the credit ratings given by one or more nationally recognized rating services.
For example, Standard and Poor's, a rating service, assigns ratings to
investment grade securities (AAA, AA, A, and BBB) based on their assessment of
the likelihood of the issuer's inability to pay interest or principal (default)
when due on each security. Lower credit ratings correspond to higher credit
risk. If a security has not received a rating, the Fund must rely entirely upon
the Adviser's credit assessment that the security is comparable to investment
grade.

INVESTMENT RISKS

There are many factors which may effect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

Bond Market Risks

o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise,
prices of fixed income securities fall.

o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity
of a fixed income security to changes in interest rates.

Credit Risks

o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.

o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the Adviser's credit
assessment.

o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating
is lowered, or the security is perceived to have an increased credit risk.
An increase in the spread will cause the price of the security to decline.

o Credit risk includes the possibility that a party to a transaction
involving the Fund will fail to meet its obligations. This could cause the
Fund to lose the benefit of the transaction or prevent the Fund from
selling or buying other securities to implement its investment strategy.

Risks Associated with Noninvestment Grade Securities

o Securities rated below investment grade, also known as junk bonds,
generally entail greater market, credit and liquidity risks than investment
grade securities. For example, their prices are more volatile, economic
downturns and financial setbacks may affect their prices more negatively,
and their trading market may be more limited.

INVESTMENT LIMITATIONS

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 unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act. The following limitations, however, may be changed by
the Board 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 Securities and
Exchange Commission) in an open-end investment company with substantially the
same investment objectives]. Shareholders will be notified before any material
changes in these limitations becomes 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."

DETERMINING MARKET VALUE OF SECURITIES

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

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

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

o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

o for short-term obligations, according to the mean between bid and asked
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 or at fair market
value as determined in good faith by the Board; and

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

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, stability, risk,
coupon rate, maturity, type of issue, trading characteristics, and other
market data or factors. From time to time, when prices cannot be obtained
from an independent pricing service, securities may be valued based on
quotes from broker-dealers or other financial institutions that trade the
securities.

The Fund values 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. Options traded in the over-the-counter market
are valued according to the mean between the last bid and the last asked
price for the option as provided by an investment dealer or other financial
institution that deals in the option. The Board may determine in good faith
that another method of valuing such investments is necessary to appraise
their fair market value.

Trading in Foreign Securities

Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, 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 NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. 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 NYSE. 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 Fund's Board, although the actual
calculation may be done by others.

WHAT DO SHARES COST?

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.

REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows.

Quantity Discounts

Larger purchases of the same Share class can reduce the sales charge you
pay. You can combine purchases of Shares made on the same day by you, your
spouse, and your children under age 21. In addition, purchases made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.

Accumulated Purchases

If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.

Concurrent Purchases

You can combine concurrent purchases of the same Share class of two or more
Federated Funds in calculating the applicable sales charge.

Letter of Intent

You can sign a Letter of Intent committing to purchase a certain amount of
the same class of Shares within a 13 month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.

Reinvestment Privilege

You may reinvest, within 120 days, your redemption proceeds at the next
determined NAV, without any sales charge.

<PAGE>

Purchases by Affiliates of the Fund

The following individuals and their immediate family members may buy Shares
at NAV without any sales charge because there are nominal sales efforts
associated with their purchases:

o the Directors, employees, and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates;

o Employees of State Street Bank Pittsburgh who started their employment on
January 1, 1998, and were employees of Federated Investors, Inc.
(Federated) on December 31, 1997;

o any associated person of an investment dealer who has a sales agreement
with the Distributor; and

o trusts, pension or profit-sharing plans for these individuals.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

These reductions or eliminations are offered because no sales commissions
have been advanced to the selling investment professional, the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC), or nominal sales efforts
are associated with the original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC
will be imposed on redemptions:

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

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan in Federated Funds to a shareholder who has
attained the age of 70-1/2;

o which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements;

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

o of Shares that represent a reinvestment within 120 days of a previous
redemption;

o of Shares held by the Directors, employees, and sales representatives of
the Fund, the Adviser, the Distributor and their affiliates; employees of any
investment professional that sells Shares according to a sales agreement with
the Distributor; and the immediate family members of the above persons; and

o of Shares originally purchased through a bank trust department, a
registered investment adviser or retirement plans where the third party
administrator has entered into certain arrangements with the Distributor or its
affiliates, or any other investment professional, to the extent that no payments
were advanced for purchases made through these entities.

HOW IS THE FUND SOLD?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.), located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, offers Shares on a continuous, best-efforts basis.

FRONT-END SALES CHARGE REALLOWANCES

The Distributor receives a front-end sales charge on certain Share sales.
The Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.

RULE 12B-1 PLAN

As a compensation type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Fund's service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual
marketing expenses. In no event will the Fund pay for any expenses of the
Distributor that exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be
paid in any one year may not be sufficient to cover the marketing related
expenses the Distributor has incurred. Therefore, it may take the Distributor a
number of years to recoup these expenses.

Federated and its subsidiaries may benefit from arrangements where the Rule
12b-1 Plan fees related to Class B Shares may be paid to third-parties who have
advanced commissions to investment professional.

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated, for providing shareholder services and maintaining shareholder
accounts. Federated Shareholder Services Company may select others to perform
these services for their customers and may pay them fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the
Distributor and/or Federated Shareholder Services Company (but not out of Fund
assets). The Distributor and/or Federated Shareholder Services Company may be
reimbursed by the Adviser or its affiliates.

Investment professionals receive such fees for providing
distribution-related or shareholder services such as sponsoring sales, providing
sales literature, conducting training seminars for employees, and engineering
sales-related computer software programs and systems. Also, investment
professionals may be paid cash or promotional incentives, such as reimbursement
of certain expenses relating to attendance at informational meetings about the
Fund or other special events at recreational-type facilities, or items of
material value. These payments will be based upon the amount of Shares the
investment professional sells or may sell and/or upon the type and nature of
sales or marketing support furnished by the investment professional.

When an investment professional's customer purchases shares, the investment
professional may receive:

o an amount equal to 0.50% of the NAV of Class A Shares under certain
qualified retirement plans as approved by the Distributor. (Such payments are
subject to a reclaim from the investment professional should the assets leave
the program within 12 months after purchase.)

o an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and
C Shares.

In addition, the Distributor may pay investment professionals 0.25% of the
purchase price of $1 million or more of Class A Shares that its customer has not
redeemed over the first year.

Class A Shares

Investment professionals purchasing Class A Shares for their customers are
eligible to receive an advance payment from the Distributor based on the
following breakpoints:

Amount Advance Payments as a Percentage of Public
Offering Price
First $1 - $5 million 0.75%
Next $5 - $20 million 0.50%
Over $20 million 0.25%

For accounts with assets over $1 million, the dealer advance payments resets
annually to the first breakpoint on the anniversary of the first purchase.

Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance payments will be paid only on
those purchases that were not previously subject to a front-end sales charge and
dealer advance payments. Certain retirement accounts may not be eligible for
this program.

A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase. The CDSC does not apply
under certain investment programs where the investment professional does not
receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.

SUBACCOUNTING SERVICES

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

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

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

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

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

As of March __, 1999, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares:

____________________, _____________, __________ owned approximately ________
Class A Shares (_____%); ____________________, _____________, __________ owned
approximately ________ Class B Shares (_____%); ____________________,
_____________, __________ owned approximately ________ Class C Shares (_____%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by the Fund.

FOREIGN INVESTMENTS

If the Fund purchases foreign securities, their investment income 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. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable.

Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax basis income includes gains or losses attributable to
currency fluctuation. 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 the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.

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. 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.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF DIRECTORS

The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation's powers except those reserved for the
shareholders. Information about each Board member is provided below and includes
each person's: name, address, birthdate, present position(s) held with the
Corporation, principal occupations for the past five years and positions held
prior to the past five years, total compensation received as a Director from the
Corporation for its most recent fiscal year, and the total compensation received
from the Federated Fund Complex for the most recent calendar year. The
Corporation is comprised of 10 funds and the Federated Fund Complex is comprised
of 54 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.

As of March __, 1999, the Fund's Board and Officers as a group owned
approximately ___% [less than 1%] of the Fund's outstanding Class A, B, and C
Shares.

<PAGE>

An asterisk (*) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940. The following symbol (#) denotes
a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.

<PAGE>

Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $1,416.84 $113,860.22 for the
Birthdate: February 3, 1934 Director, Member of Executive Committee, Children's Corporation and
15 Old Timber Trail Hospital of Pittsburgh; formerly: Senior Partner, 54 other investment
Pittsburgh, PA Ernst & Young LLP; Director, MED 3000 Group, Inc.; companies
DIRECTOR Director, Member of Executive Committee, University of in the Fund Complex
Pittsburgh.

John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $1,558.76 $125,264.48 for the
Birthdate: June 23, 1937 President, Investment Properties Corporation; Senior Corporation and
Wood/IPC Commercial Dept. Vice President, John R. Wood and Associates, Inc., 54 other investment
John R. Wood Associates, Inc. Realtors; Partner or Trustee in private real estate companies
Realtors ventures in Southwest Florida; formerly: President, in the Fund Complex
3255 Tamiami Trial North Naples Property Management, Inc. and Northgate Village
Naples, FL Development Corporation.
DIRECTOR

Nicholas Constantakis Director or Trustee of the Federated Fund Complex; $1,416.84 $47,958.02 for the
Birthdate: September 3, 1939 formerly: Partner, Andersen Worldwide SC. Corporation and
175 Woodshire Drive 29 other investment
Pittsburgh, PA companies
DIRECTOR in the Fund Complex

William J. Copeland Director or Trustee of the Federated Fund Complex; $1,558.76 $125,264.48 for the
Birthdate: July 4, 1918 Director and Member of the Executive Committee, Corporation and
One PNC Plaza-23rd Floor Michael Baker, Inc.; formerly: Vice Chairman and 54 other investment
Pittsburgh, PA Director, PNC Bank, N.A., and PNC Bank Corp.; companies
DIRECTOR Director, Ryan Homes, Inc. in the Fund Complex

Previous Positions: Director, United Refinery;
Director, Forbes Fund; Chairman, Pittsburgh
Foundation; Chairman, Pittsburgh Civic Light Opera.

James E. Dowd, Esq. Director or Trustee of the Federated Fund Complex; $1,558.76 $125,264.48 for the
Birthdate: May 18, 1922 Attorney-at-law; Director, The Emerging Germany Fund, Corporation and
571 Hayward Mill Road Inc. 54 other investment
Concord, MA companies
DIRECTOR Previous Positions: President, Boston Stock Exchange, in the Fund Complex
Inc.; Regional Administrator, United States Securities
and Exchange Commission.

Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $1,416.84 $113,860.22 for the
Birthdate: October 11, 1932 Professor of Medicine, University of Pittsburgh; Corporation and
3471 Fifth Avenue Medical Director, University of Pittsburgh Medical 54 other investment
Suite 1111 Center - Downtown; Hematologist, Oncologist, and companies
Pittsburgh, PA Internist, University of Pittsburgh Medical Center; in the Fund Complex
DIRECTOR Member, National Board of Trustees, Leukemia Society
of America.
Edward L. Flaherty, Jr., Esq. Director or Trustee of the Federated Fund Complex; $1,558.76 $125,264.48 for the
# Attorney, of Counsel, Miller, Ament, Henny & Kochuba; Corporation and
Birthdate: June 18, 1924 Director ,Emeritus, Eat'N Park Restaurants, Inc.; 54 other investment
Miller, Ament, Henny & Kochuba formerly: Counsel, Horizon Financial, F.A., Western companies
205 Ross Street Region; Partner, Meyer and Flaherty. in the Fund Complex
Pittsburgh, PA
DIRECTOR

Peter E. Madden Director or Trustee of the Federated Fund Complex; $1,416.84 $113,860.22 for the
Birthdate: March 16, 1942 formerly: Representative, Commonwealth of Corporation and
One Royal Palm Way Massachusetts General Court; President, State Street 54 other investment
100 Royal Palm Way Bank and Trust Company and State Street Corporation. companies
Palm Beach, FL in the Fund Complex
DIRECTOR Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation.

Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Funds; $0 $0 for the
Birthdate: April 10, 1945 Managment Consultant. Corporation and
80 South Road 25 other
Westhampton Beach, NY Retired: Chief Executive Officer, PBTC International investment
DIRECTOR Bank; Chief Financial Officer of Retail Banking companies
Sector, Chase Mahattan Bank; Senior Vice President, in the Fund Complex
Marine Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance, Frank G.
Zarb School of Business, Hofstra University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $1,416.84 $113,860.22 for the
S.J.D. President, Law Professor, Duquesne University; Corporation and
Birthdate: December 20, 1932 Consulting Partner, Mollica & Murray. 54 other investment
President, Duquesne University companies
Pittsburgh, PA Previous Positions: Dean and Professor of Law, in the Fund Complex
DIRECTOR University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.

Wesley W. Posvar Director or Trustee of the Federated Fund Complex; $1,416.84 $113,860.22 for the
Birthdate: September 14, 1925 President, World Society of Ekistics (metropolitan Corporation and
1202 Cathedral of Learning planning), Athens; Professor, International Politics; 54 other investment
University of Pittsburgh Management Consultant; Trustee, Carnegie Endowment for companies
Pittsburgh, PA International Peace, RAND Corporation, Online Computer in the Fund Complex
DIRECTOR 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; Trustee,
Czech Management Center, Prague.
Retired: Professor, United States Military Academy;
Professor, United States Air Force Academy.

Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $1,416.84 $113,860.22 for the
Birthdate: June 21, 1935 Public Relations/Marketing/Conference Planning. Corporation and
4905 Bayard Street 54 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies
DIRECTOR Company of America; business owner. in the Fund Complex

J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the
Birthdate: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds Corporation and
Federated Investors Tower in the Federated Fund Complex; President and Director, 16 other investment
1001 Liberty Avenue Federated Investors, Inc.; President and Trustee, companies
Pittsburgh, PA Federated Advisers, Federated Management, and in the Fund Complex
EXECUTIVE VICE PRESIDENT Federated Research; President and Director, Federated
Research Corp. and Federated Global Investment
Management Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company;
Director, Federated Services Company.

<PAGE>

Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the
Birthdate: October 22, 1930 Federated Fund Complex; President, Executive Vice Corporation and
Federated Investors Tower President and Treasurer of some of the Funds in the 1 other investment
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated companies
Pittsburgh, PA Investors, Inc.; Vice President, Federated Advisers, in the Fund Complex
EXECUTIVE VICE PRESIDENT Federated Management, Federated Research, Federated
Research Corp., Federated Global Investment Management
Corp. and Passport Research, Ltd.; Executive Vice
President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.

John W. McGonigle Executive Vice President and Secretary of the $0 $0 for the
Birthdate: October 26, 1938 Federated Fund Complex; Executive Vice President, Corporation and
Federated Investors Tower Secretary, and Director, Federated Investors, Inc.; 54 other investment
1001 Liberty Avenue Trustee, Federated Advisers, Federated Management, and companies
Pittsburgh, PA Federated Research; Director, Federated Research Corp. in the Fund Complex
EXECUTIVE VICE PRESIDENT and Federated Global Investment Management Corp.;
Director, Federated Services Company; Director,
Federated Securities Corp.

Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $0 $0 for the
Birthdate: June 17, 1954 President - Funds Financial Services Division, Corporation and
Federated Investors Tower Federated Investors, Inc.; Formerly: various 54 other investment
1001 Liberty Avenue management positions within Funds Financial Services companies
Pittsburgh, PA Division of Federated Investors, Inc. in the Fund Complex
TREASURER

Henry A. Frantzen Chief Investment Officer of this Fund and various $0 $0 for the
Birthdate: November 28, 1942 other Funds in the Federated Fund Complex; Executive Corporation and
Federated Investors Tower Vice President, Federated Investment Counseling, 3 other investment
1001 Liberty Avenue Federated Global Investment Management Corp., companies
Pittsburgh, PA Federated Advisers, Federated Management, Federated in the Fund Complex
CHIEF INVESTMENT OFFICER Research, and Passport Research, Ltd.; Registered
Representative, Federated Securities Corp.; Vice
President, Federated Investors, Inc.; Formerly:
Executive Vice President, Federated Investment
Counseling Institutional Portfolio Management Services
Division; Chief Investment Officer/Manager,
International Equities, Brown Brothers Harriman & Co.;
Managing Director, BBH Investment Management Limited.
Drew J. Collins Drew J. Collins has been some of the Fund's portfolio $0 $0 for the
Birthdate: December 19, 1956 manager since inception. He is Vice President of the Corporation and
Federated Investors Tower Corporation. Mr. Collins joined Federated Investors 1 other investment
1001 Liberty Avenue in 1995 as a Senior Portfolio Manager and a Senior company
Pittsburgh, PA Vice President of the Fund's investment adviser. Mr. in the Fund Complex
VICE PRESIDENT 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.
</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Corporation.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for
the Fund.

The Adviser is a wholly-owned subsidiary of Federated.

The Adviser shall not be liable to the Corporation, the Fund, or any Fund
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
Corporation.

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 Fund Shares offered by the Distributor.

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. 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. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). 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 the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.

Research Services

Research services 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 may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
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 those 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, 1998, the Fund's adviser directed
brokerage transactions to certain brokers due to research services they
provided. The total amount of these transactions was $_______ for which the Fund
paid $_______ in brokerage commissions.

On November 30,1998, the Fund owned securities of the following regular
broker/dealers:

Investment decisions for the Fund are made independently from those of
other accounts managed by the Adviser. When the Fund and one or more of those
accounts invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

Federated Services Company, a subsidiary of Federated, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at the following annual rate of the average aggregate daily net
assets of all Federated Funds as specified below:

<S> <C>

Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

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

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT PUBLIC ACCOUNTANTS

Ernst & Young LLP, Boston, Massachusetts, is the independent auditor for the
Fund.

<PAGE>

FEES PAID BY THE FUND FOR SERVICES

For the Year ended November 30 1998 1997 1996
Advisory Fee Earned $ $100,152 $48,769
Advisory Fee Reduction $ $100,152 $48,769
Brokerage Commissions $ $200,241 $69,033
Administrative Fee $ $185,000 $141,023
12b-1 Fee
Class A Shares $ N/A N/A
Class B Share $ N/A N/A
Class C Shares $ N/A N/A
Shareholder Services Fee
Class A Shares $ N/A N/A
Class B Share $ N/A N/A
Class C Shares $ N/A N/A
</TABLE>

Fees are allocated among Classes based on their pro rata share of Fund
assets, except for marketing (Rule 12b-1) fees and shareholder services fees,
which are borne only by the applicable Class of Shares.

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the Securities and
Exchange Commission's (SEC) standard method for calculating performance
applicable to all mutual funds. The SEC also permits this standard performance
information to be accompanied by non-standard performance information.

Unless otherwise stated, any quoted Share performance reflects the effect
of non-recurring charges, such as maximum sales charges, which, if excluded,
would increase the total return and yield. The performance of Shares depends
upon such variables as: portfolio quality; average portfolio maturity; type and
value of portfolio securities; changes in interest rates; changes or differences
in the Fund's or any class of Shares' expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

Average Annual Total Returns and Yield

Total returns given for the one- and five- and since inception periods
ended November 30, 1998.

Yield given for the 30-day period ended November 30, 1998.

1 Year 5 Years Since Inception
Class Name
Total Return
Class A Shares
Class B Shares
Class C Shares
Yield
Class A Shares
Class B Shares
Class C Shares

<PAGE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value
of Shares over a specific period of time, and includes the investment of income
and capital gains distributions.

The average annual total return for Shares 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 NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD

The yield of Shares is calculated by dividing: (i) the net investment
income per Share earned by the Shares over a thirty-day period; by (ii) the
maximum offering price per Share on the last day of the period. This number is
then annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated each
month over a 12-month period and is reinvested every six months. The yield does
not necessarily reflect income actually earned by Shares because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

To the extent investment professional and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on how
such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the
Investment Company Institute.

The Fund may compare its performance, or performance for the types of
securities in which it invests, to a variety of other investments, including
federally insured bank products such as bank savings accounts, certificates of
deposit, and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete
view of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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)

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 S&P 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

Includes, 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
Provides a detailed breakdown of local market and currency returns since 1960.

Bear Stearns Foreign Bond Index

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, which 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.

CDA/Wiesenberger Investment Company Services

Mutual fund rankings and data 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

Includes 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

Composed of telecommunications companies in the developing and emerging
countries.

Datastream, InterSec, FactSet, Ibbotson Associates, and Worldscope

Database retrieval services for information including, but not limited to,
international financial and economic data.

International Financial Statistics
Produced by the International Monetary Fund.

World Bank

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

International Bank for Reconstruction and Development
Various publications.

Moody's Investors Service, Inc., Fitch IBCA, Inc. and Standard & Poor's
Various publications

Wilshire Associates

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

Provides detailed statistics on stock and bond markets in developing
countries, including IFC market indices.

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

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

Federated Funds overview

Municipal Funds

In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

Equity Funds

In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

Corporate Bond Funds

In the corporate bond sector, as of December 31, 1998, Federated managed 9
money market funds and 15 bond funds with assets approximating $22.8 billion and
$7.1 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset-backed securities market, a market
totaling more than $209 billion.

Government Funds

In the government sector, as of December 31, 1998, Federated manages 9
mortgage-backed, 5 government/ agency and 19 government money market mutual
funds, with assets approximating $5.3 billion, $1.8 billion and $41.6 billion,
respectively. Federated trades approximately $425 million in U.S. government and
mortgage-backed securities daily and places approximately $25 billion in
repurchase agreements each day. Federated introduced the first U.S. government
fund to invest in U.S. government bond securities in 1969. Federated has been a
major force in the short- and intermediate-term government markets since 1982
and currently manages approximately $43.2 billion in government funds within
these maturity ranges.

Money Market Funds

In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively. The
Chief Investment Officers responsible for oversight of the various investment
sectors within Federated are: U.S. equity and high yield - J. Thomas Madden;
U.S. fixed income -William D. Dawson, III; and global equities and fixed income
- - Henry A. Frantzen. The Chief Investment Officers are Executive Vice Presidents
of the Federated advisory companies.

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 $5 trillion to the more than 7,300 funds
available, according to the Investment Company Institute.

Federated Clients Overview

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

Institutional Clients

Federated meets the needs of approximately 900 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.

Bank Marketing

Other institutional clients include 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, Broker/Dealer Sales Division, Federated Securities Corp.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended November
30, 1998, are incorporated herein by reference to the Annual Report to
Shareholders of Federated Asia Pacific Growth Fund dated November 30, 1998.

<PAGE>

INVESTMENT RATINGS

Standard and Poor's Long-Term Debt Rating Definitions

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

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

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

BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate 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.

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. 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.

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 IBCA, Inc. Long-Term Debt Rating Definitions

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

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

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

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

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

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

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

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

C--Bonds are 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:

o Leading market positions in well established industries.

o High rates of return on funds employed.

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

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

o 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 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 IBCA, Inc. Commercial Paper Rating Definitions

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

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

<PAGE>

ADDRESSES

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
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

Investment Adviser
Federated Global Investment Management 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
200 Clarendon Street
Boston, MA 02116-5072

Prospectus

FEDERATED EMERGING MARKETS FUND

A Portfolio of World Investment Series, Inc.

Class a shares
class b shares
class c shares

A mutual fund seeking long-term growth of capital by investing primarily in
equity securities of issuers and companies located in countries having emerging
markets.

march __, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide long-term growth of capital.
While there is no assurance that the Fund will achieve its investment objective,
it endeavors to do so by following the investment strategies and policies
described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The fund pursues its investment objective by investing at least 65% of its
assets in equity securities of issuers and companies located in countries having
emerging markets. Emerging markets are those which have gross domestic product
per capita lower than $10,000 per year.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose
money by investing in the Fund. The primary factors that may reduce the Fund's
returns include:

o investments in securities of emerging market countries,

o fluctuations in the value of equity securities in foreign securities
markets, and

o fluctuations in the exchange rate between the U.S. dollar and foreign
currencies.

An investment in the Fund involves additional risks such as sector risks and
risks of foreign investing.

Risk/Return Bar Chart and Table
| Federated Emerging Markets Fund

[The graphic presentation displayed here consists of a bar chart representing
the annual total returns of Class A Shares of Federated Emerging Markets Fund as
of the calendar year-end for each of two years. The `y' axis reflects the "%
Total Return" beginning with "-30.00%" and increasing in increments of 5.00% up
to 0.00%. The `x' axis represents calculation periods from the earliest calendar
year end of the Fund's start of business through the calendar year ended
December 31, 1998. The light gray shaded chart features two distinct vertical
bars, each shaded in charcoal, and each visually representing by height the
total return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class A Shares for each calendar year
is stated directly at the bottom of each respective bar, for the calendar years
1997 through1998. The percentages noted are: -1.56% and -25.02%, respectively.
The bar chart shows the variability of the Fund's Class A Shares total returns
on a year-end basis.] The Fund's Class A Shares are sold subject to a sales
charge (load). The impact of the sales charges are not reflected in the total
returns above, and if these amounts were reflected, returns would be less than
those shown. Within the period shown in the Chart, the Fund's Class A Shares
highest quarterly return was 13.79% (quarter ended March 31, 1997). Its lowest
quarterly return was -25.24% (quarter ended September 30, 1998).

Average Annual Total Return
Calendar Period Class A Class B Class C IFCIC
1 Year -25.02% -25.65% -25.63% %
Life of the Fund1 -5.52% -6.27% -6.23% %
</TABLE>

1 The Fund's Class A, Class B and Class C Shares start of performance date
was February 28, 1996. The table shows the Fund's Class A, Class B and
Class C Shares average annual total returns compared to the International
Finance Corporation Investable Composite Index (IFCIC), for the calendar
periods ending December 31, 1998. Past performance does not necessarily
predict future performance. This information provides you with historical
performance information so that you can analyze whether the Fund's
investment risks are balanced by its potential rewards.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

FEDERATED EMERGING MARKETS FUND

Fees and Expenses

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's Class A, B, or C Shares.

Annual Fund Operating Expenses (Before Reimbursements/Waivers)(1)
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management Fee(2) 1.25% 1.25% 1.25%
Distribution (12b-1) Fee(3) 0.25% 0.75% 0.75%
Shareholder Services Fee 0.25% 0.25% 0.25%
Other Expenses(4) 1.58% 1.58% 1.58%
Total Annual Fund Operating Expenses 3.08% 3.58%(5) 3.58%
1 Although not contractually obligated to do so, the adviser will waive and
distributor will reimburse certain amounts. These are shown below along
with the net expenses the Fund would actually pay for the fiscal year
ending November 30, 1998.
Reimbursements/Waivers of Fund Expenses 0.48% 0.23% 0.23%
Total Actual Annual Fund Operating Expenses (after reimbursements/waivers) 2.60% 3.35% 3.35%
</TABLE>

4 The adviser voluntarily reimbursed certain operating expenses of the Fund.
The adviser can terminate this voluntary reimbursement at any time. Total
other expenses paid by the Fund (after the voluntary reimbursement) were
1.53% for the year ended November 30, 1998. 5 Class B Shares convert to
Class A Shares (which pay lower ongoing expenses) approximately eight years
after purchase.

<PAGE>

Example

The following Example is intended to help you compare the cost of investing
in the Fund's Class A Shares, Class B Shares and Class C Shares with the cost of
investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund's Class A, Class B,
and Class C Shares for the time periods indicated and then redeem all of your
shares at the end of those periods. Expenses assuming no redemption are also
shown. The Example also assumes that your investment has a 5% return each year
and that the Fund's Class A, Class B, and Class C Shares operating expenses are
before reimbursements/waivers as shown in the Table and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

Share Class 1 Year 3 Years 5 Years 10 Years
Class A Shares
Expenses assuming redemption $844 $1,449 $2,077 $3,756
Expenses assuming no redemption $844 $1,449 $2,077 $3,756
Class B Shares
Expenses assuming redemption $918 $1,514 $2,069 $3,735
Expenses assuming no redemption $361 $1,097 $1,855 $3,735
Class C Shares
Expenses assuming redemption $462 $1,097 $1,855 $3,845
Expenses assuming no redemption $361 $1,097 $1,855 $3,845

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The adviser weighs several factors in selecting investments for the
portfolio. First, the adviser analyzes a country's general economic condition
and outlook, including its interest rates, foreign exchange rates and trade
balance. In connection with this analysis, the adviser also considers how
developments in other countries in the region or the world might affect these
factors. Using its analysis, the adviser tries to identify countries with
favorable characteristics, such as a strengthening economy, favorable inflation
rate or sound budget policy.

The adviser then evaluates available investments in these countries by
examining the issuer's liquidity, industry representation, performance relative
to its industry, and profitability as well its products, the quality of its
management, and its competitive position in the marketplace. Under normal market
conditions, the adviser manages the Fund so that its portfolio contains over 200
stocks. Under normal market conditions, the adviser expects to be invested in
more than 20 countries.

Companies may be grouped together in broad categories called business
sectors. The adviser may emphasize certain business sectors in the portfolio
that exhibit stronger growth potential or higher profit margins. The adviser
allocates the portfolio among five economic sectors: consumer, financial,
industrial, resources, and utilities. The adviser tries to select securities
that offer the best potential returns consistent with its general portfolio
strategy.

Portfolio Turnover

The Fund actively trades its portfolio securities in an attempt to achieve
its investment objective. Active trading will cause the Fund to have an
increased portfolio turnover rate, which is likely to generate shorter-term
gains (losses) for its shareholders, which are taxed at a higher rate than
longer-term gains (losses). Actively trading portfolio securities increases the
Fund's trading costs and may have an adverse impact the Fund's performance.

Temporary Defensive Investments

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

Foreign Securities
Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the
United States if:

o........it is organized under the laws of, or has a principal office
located in, another country;

o the principal trading market for its securities is in another country; or

Foreign securities are often denominated in foreign currencies. Along with
the risks normally associated with domestic fixed income securities, foreign
securities are subject to currency risks and risks of foreign investing.

Depositary Receipts

Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary
Receipts (IDRs), are traded globally or outside the United States. Depositary
receipts involve many of the same risks of investing directly in foreign
securities, including currency risks and risks of foreign investing.

Foreign Exchange Contracts

Equity Securities

Equity securities represent a share of an issuer's earnings and assets,
after the issuer pays its liabilities. The Fund cannot predict the income it
will receive from equity securities because issuers generally have discretion as
to the payment of any dividends or distributions. However, equity securities
offer greater potential for appreciation than many other types of securities,
because their value increases directly with the value of the issuer's business.
The following describes the principal type of equity securities in which the
Fund invests.

Common Stocks

Preferred Stocks

Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on common
stock. Preferred stocks may also permit the issuer to redeem the stock.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

Stock Market Risks

o The value of equity securities in the Fund's portfolio will rise and
fall. These fluctuations could be a sustained trend or a drastic movement. The
Fund's portfolio will reflect changes in prices of individual portfolio stocks
or general changes in stock valuations. Consequently, the Fund's share price may
decline and you could lose money.

o The Adviser attempts to manage market risk by limiting the amount the
Fund invests in each company. However, diversification will not protect the Fund
against widespread or prolonged declines in the stock market.

Currency Risks

o The adviser attempts to manage currency risk by limiting the amount the
Fund invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in the
value of the U.S. dollar relative to other currencies.

Risks of Foreign Investing

o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable that those of the United States.
Foreign financial markets may also have fewer investor protections. Securities
in foreign markets may also be subject to taxation policies that reduce returns
for U.S. investors.

o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the United
States. Foreign companies may also receive less coverage than United States
companies by market analysts and the financial press. In addition, foreign
countries may lack uniform accounting, auditing and financial reporting
standards or regulatory requirements comparable to those applicable to U.S.
companies. These factors may prevent the Fund and its adviser from obtaining
information concerning foreign companies that is as frequent, extensive and
reliable as the information available concerning companies in the United States.

o Foreign countries may have restrictions on foreign ownership of
securities or may impose exchange controls, capital flow restrictions or
repatriation restrictions which could adversely affect the liquidity of the
Fund's investments.

Emerging Market Risks

o Securities issued or traded in emerging markets generally entail greater
risks than securities issued or traded in developed markets. For example, their
prices can be significantly more volatile than prices in developed countries.
Emerging market economies may also experience more severe downturns (with
corresponding currency devaluations) than developed economies.

o 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.

<PAGE>

Liquidity Risks

o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, the Fund may have to accept a lower price
to sell a security, sell other securities to raise cash or give up an investment
opportunity, any of which could have a negative effect on the Fund's
performance. Infrequent trading of securities may also lead to an increase in
their price volatility.

WHAT DO SHARES COST?

You can purchase, redeem, or exchange Shares any day the New York Stock
Exchange (NYSE) is open. When the Fund receives your transaction request in
proper form, it is processed at the next calculated net asset value (NAV), plus
any applicable front-end sales charge (public offering price).

NAV is determined at the end of regular trading (normally 4 p.m. Eastern
time) each day the NYSE is open. The Fund's current NAV and public offering
price may be found in the mutual funds section in local newspapers under
"Federated" and the appropriate class designation listing.

The following table summarizes the minimum required investment amount and
the maximum sales charge, if any, that you will pay on an investment in the
Fund. Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.

1 The minimum initial and subsequent investment amounts for retirement plans
are $250 and $100, respectively. The minimum subsequent investment amounts
for Systematic Investment Programs is $50. Investment professionals may
impose higher or lower minimum investment requirements on their customers
than those imposed by the Fund. Orders for $250,000 or more will be
invested in Class A Shares instead of Class B Shares to maximize your
return and minimize the sales charges and marketing fees. Accounts held in
the name of an investment professional may be treated differently. Class B
Shares will automatically convert into Class A Shares after eight full
years from the purchase date. This conversion is a non-taxable event.

2 Front-End Sales Charge is expressed as a percentage of public offering
price. See "Sales Charge When You Purchase" below.

3 See "Sales Charge When You Redeem" below.

SALES CHARGE WHEN YOU PURCHASE
Class A Shares

<PAGE>

1 A contingent deferred sales charge of 0.75% of the redemption amount
applies to Class A Shares redeemed up to 24 months after purchase under certain
investment programs where an investment professional received an advance payment
on the transaction.

<PAGE>

The sales charge at purchase may be reduced or eliminated by:

o purchasing Shares in greater quantities to reduce the applicable sales
charge;

o combining concurrent purchases of Shares:

- - by you, your spouse, and your children under age 21; or

- of the same share class of two or more Federated Funds (other than money
market funds);

o accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or

o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

The sales charge will be eliminated when you purchase Shares:

o within 120 days of redeeming Shares of an equal or lesser amount;

o by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);

o through wrap accounts or other investment programs where you pay the
investment professional directly for services;

o through investment professionals that receive no portion of the sales
charge;

o as a Federated Life Member (Class A Shares only) and their immediate
family members; or

o as a Director or employee of the Fund, the Adviser, the Distributor and
their affiliates, and the immediate family members of these individuals.

If your investment qualifies for a reduction or elimination of the sales
charge, you or your investment professional should notify the Fund's
Distributor, Federated Securities Corp., at the time of purchase. If the
Distributor is not notified, you will receive the reduced sales charge only on
additional purchases, and not retroactively on previous purchases.

SALES CHARGE WHEN YOU REDEEM

Your redemption proceeds may be reduced by a sales charge, commonly
referred to as a contingent deferred sales charge (CDSC).

Class A Shares

A contingent deferred sales charge of 0.75% of the redemption amount
applies to Class A Shares redeemed up to 24 months after purchase under certain
investment programs where an investment professional received an advance payment
on the transaction.

Class B Shares
Shares Held Up To: CDSC
1 year 5.50%
2 years 4.75%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 years or more 0.00%

Class C Shares
You will pay a 1% CDSC if you redeem Shares within one year
of the purchase date.

<PAGE>

You Will Not be Charged a CDSC When Redeeming Shares:

o purchased with reinvested dividends or capital gains;

o purchased within 120 days of redeeming Shares of an equal or lesser
amount;

o that you exchanged into the same share class of another Federated Fund
where the shares were held for the applicable CDSC holding period (other than a
money market fund);

o purchased through investment professionals that did not receive advanced
sales payments; or

o if after you purchase Shares, you become disabled as defined by the IRS.

In addition, you will not be charged a CDSC:

o if the Fund redeems your Shares and closes your account for not meeting
the minimum balance requirement;

o if your redemption is a required retirement plan distribution;

o upon the death of the last surviving shareholder of the account.

If your redemption qualifies, you or your investment professional should
notify the Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.

To keep the sales charge as low as possible, the Fund redeems your Shares
in this order:

o Shares that are not subject to a CDSC;

o Shares held the longest (to determine the number of years your Shares
have been held, include the time you held shares of other Federated Funds that
have been exchanged for Shares of this Fund); and

o then, the CDSC is calculated using the share price at the time of
purchase or redemption, whichever is lower.

<PAGE>

HOW IS THE FUND SOLD?

The Fund offers three share classes: Class A Shares, Class B Shares, and
Class C Shares, each representing interests in a single portfolio of securities.

RULE 12B-1 PLAN

HOW TO PURCHASE SHARES

Where the Fund offers more than one Share Class and you do not specify the
Class choice on your New Account Form or form of payment (e.g., Federal Reserve
wire and check), you automatically will receive Class A Shares.

THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and

o Submit your purchase order to the investment professional before the end
of regular trading on the NYSE (normally 4 p.m. Eastern time). You will receive
the next calculated NAV if the investment professional forwards the order to the
Fund on the same day and the Fund receives payment within three business days.
You will become the owner of Shares and receive dividends when the Fund receives
your payment.

Investment professionals should send payments according to the instructions
in the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

o Establish your account with the Fund by submitting a completed New
Account Form; and

o Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the
next calculated NAV after the Fund receives your wire or your check. If your
check does not clear, your purchase will be canceled and you could be liable for
any losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the
Fund and the Shares will be priced at the next calculated NAV after the Fund
receives the order.

By Wire
Send your wire to:

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

By Check

Make your check payable to The Federated Funds, note your account number on
the check, and mail it to:

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

If you send your check by a private courier or overnight delivery service
that requires a street address, mail it to:

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

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone other
than you or The Federated Funds).

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same Share class of
another Federated Fund. You must meet the minimum initial investment requirement
for purchasing Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM

BY AUTOMATED CLEARINGHOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through
a depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

RETIREMENT INVESTMENTS

You may purchase Shares as retirement investments (such as qualified plans
and IRAs or transfer or rollover of assets). Call your investment professional
or the Fund for information on retirement investments. We suggest that you
discuss retirement investments with your tax adviser. You may be subject to an
annual IRA account fee.

<PAGE>

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

o through an investment professional if you purchased Shares through an
investment professional; or

o directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional
by the end of regular trading on the NYSE (normally 4 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by calling the Fund once you have
completed the appropriate authorization form for telephone transactions. If you
call before the end of regular trading on the NYSE (normally 4 p.m. Eastern
time) you will receive a redemption amount based on that day's NAV.

By Mail

You may redeem or exchange Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after
the Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed or exchanged;

o signatures of all Shareholders exactly as registered; and

o if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

Signature Guarantees
Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last thirty days;

o a redemption is payable to someone other than the shareholder(s) of
record; or

o if exchanging (transferring) into another fund with a different
shareholder registration.

A signature guarantee is designed to protect your account from fraud.
Obtain a signature guarantee from a bank or trust company, savings association,
credit union or broker, dealer, or securities exchange member. A notary public
cannot provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record.
The following payment options are available if you complete the appropriate
section of the New Account Form or an Account Service Options Form. These
payment options require a signature guarantee if they were not established when
the account was opened:

o an electronic transfer to your account at a financial institution that is
an ACH member; or

o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.

Redemption in Kind

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day
after receiving a request in proper form. Payment may be delayed up to seven
days:

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the
Fund's ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund
if those checks are undeliverable and returned to the Fund.

REDEMPTIONS FROM RETIREMENT ACCOUNTS

EXCHANGE PRIVILEGES

You may exchange Shares of the Fund into Shares of the same class of
another Federated Fund. To do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

<PAGE>

Systematic Withdrawal Program (SWP) On Class B Shares
You will not be charged a CDSC on SWP redemptions if:

o you redeem 12% or less of your account value in a single year;

o your account is at least one year old;

o you reinvest all dividends and capital gains distributions; and

o your account has at least a $10,000 balance when you establish the SWP.
(You cannot aggregate multiple Class B Share accounts to meet this minimum
balance).

You will be subject to a CDSC on redemption amounts that exceed the 12%
annual limit. In measuring the redemption percentage, your account is valued
when you establish the SWP and then annually at calendar year-end. You can
redeem only at a rate of 1% monthly, 3% quarterly, or 6% semi-annually.

ADDITIONAL CONDITIONS

Telephone Transactions

The Fund will record your telephone instructions. If the Fund does not
follow reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

Share Certificates

The Fund no longer issues share certificates. If you are redeeming or
exchanging Shares represented by certificates previously issued by the Fund, you
must return the certificates with your written redemption or exchange request.
For your protection, send your certificates by registered or certified mail, but
do not endorse them.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges
(except for systematic transactions). In addition, you will receive periodic
statements reporting all account activity, including systematic transactions,
dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares and pays any dividends annually to shareholders.
Dividends are paid to all shareholders invested in the Fund on the record date.
The record date is the date on which a shareholder must officially own shares in
order to earn a dividend.

In addition, the Fund pays any capital gains at least annually. Your
dividends and capital gains distributions will be automatically reinvested in
additional Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a dividend or capital
gain distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances,
non-retirement accounts may be closed if redemptions or exchanges cause the
account balance to fall below the minimum initial investment amount. Before an
account is closed, you will be notified and allowed 30 days to purchase
additional Shares to meet the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you
in completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be primarily capital gains. Redemptions
and exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.

WHO MANAGES THE FUND?

The Fund's portfolio managers are:

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.

Drew J. Collins has been the Fund's portfolio manager since its inception .
Mr. Collins joined Federated Investors, Inc. 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. Christopher
Matyszewski is an Investment Analyst who assists the portfolio managers in
selecting and monitoring the securities in which the Fund invests. Mr.
Matyszewski joined Federated in June 1997; he was a Securities Trader for
Brandes Investment from September 1994 through January 1996. Mr. Matyszewski
earned his Masters of International Management from The American Graduate School
for International Management.

The Adviser and other subsidiaries of Federated advise approximately 200
mutual funds and separate accounts, which total more than $110 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.

Advisory Fees

The Adviser receives an annual investment advisory fee of 1.25% of the
Fund's average daily net assets. The Adviser may voluntarily waive a portion of
its fee or reimburse the Fund for certain operating expenses.

Year 2000 Readiness

The "Year 2000" problem is the potential for computer errors or failures
because certain computer systems may be unable to interpret dates after December
31, 1999. The Year 2000 problem may cause systems to process information
incorrectly and could disrupt businesses that rely on computers, like the Fund.

While it is impossible to determine in advance all of the risks to the
Fund, the Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems
to fix any Year 2000 problems. In addition, they are working to gather
information from third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments.
To assess the potential effect of the Year 2000 problem, the Adviser is
reviewing information regarding the Year 2000 readiness of issuers of securities
the Fund may purchase.

However, this may be difficult with certain issuers. For example, funds
dealing with foreign service providers or investing in foreign securities, will
have difficulty determining the Year 2000 readiness of those entities. This is
especially true of entities or issuers in emerging markets.

The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

<PAGE>

FEDERATED EMERGING MARKETS FUND

A Portfolio of World Investment Series, Inc.

class a shares
class b shares
class c shares

You can obtain information about the Fund (including the SAI) by visiting
or writing the Public Reference Room of the Securities and Exchange Commission
in Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

Investment Company Act File No. 811-7141
Cusip 981487804
981487887
981487879

G01472-02 (3/99)

Statement of Additional Information

FEDERATED EMERGING MARKETS FUND

A Portfolio of World Investment Series, Inc.

Class a shares
class b shares
class c shares

This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectus for Federated Emerging Markets Fund
(Fund) and Class A, B and C Shares, dated March __, 1999. This SAI incorporates
by reference the Fund's Annual Report. Obtain the prospectus or the Annual
Report without charge by calling 1-800-341-7400.

MARCH __, 1999

G01472-03 (2/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

Following is a table that indicates which types of securities are a:
o P = Principal investment of the Fund; (shaded in chart) or
o A = Acceptable (but not principal) investment of the Fund.

SECURITIES DESCRIPTIONS AND TECHNIQUES

Foreign Securities

Foreign securities are securities of issuers based outside the United
States. The Fund considers an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in,
another country;

o the principal trading market for its securities is in another country; or

Depositary Receipts

Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary
Receipts (IDRs), are traded globally or outside the United States. Depositary
receipts involve many of the same risks of investing directly in foreign
securities, including currency risks and risks of foreign investing.

Foreign Exchange Contracts

Foreign Government Securities

Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples of these include, but are not limited to, the International Bank for
Reconstruction and Development (the World Bank), the Asian Development Bank, the
European Investment Bank and the Inter-American Development Bank.

Foreign government securities also include fixed income securities of
quasi-governmental agencies that are either issued by entities owned by a
national, state or equivalent government or are obligations of a political unit
that are not backed by the national government's full faith and credit. Further,
foreign government securities include mortgage-related securities issued or
guaranteed by national, state or provincial governmental instrumentalities,
including quasi-governmental agencies.

Equity Securities

Equity securities represent a share of an issuer's earnings and assets,
after the issuer pays its liabilities. The Fund cannot predict the income it
will receive from equity securities because issuers generally have discretion as
to the payment of any dividends or distributions. However, equity securities
offer greater potential for appreciation than many other types of securities,
because their value increases directly with the value of the issuer's business.
The following describes the types of equity securities in which the Fund
invests.

Common Stocks

Preferred Stocks

Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on common
stock. Preferred stocks may also permit the issuer to redeem the stock.

Interests in Other Limited Liability Companies

Entities such as limited partnerships, limited liability companies,
business trusts and companies organized outside the United States may issue
securities comparable to common or preferred stock.

Warrants

Warrants give the Fund the option to buy the issuer's equity securities at
a specified price (the exercise price) at a specified future date (the
expiration date). The Fund may buy the designated securities by paying the
exercise price before the expiration date. Warrants may become worthless if the
price of the stock does not rise above the exercise price by the expiration
date. This increases the market risks of warrants as compared to the underlying
security. Rights are the same as warrants, except companies typically issue
rights to existing stockholders.

Fixed Income Securities

Fixed income securities pay interest, dividends or distributions at a
specified rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

The following describes the types of fixed income securities in which the
Fund invests.

Treasury Securities

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

Convertible Securities

Derivative Contracts

Derivative contracts are financial instruments that require payments based
upon changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities
exchanges. In this case, the exchange sets all the terms of the contract except
for the price. Investors make payments due under their contracts through the
exchange. Most exchanges require investors to maintain margin accounts through
their brokers to cover their potential obligations to the exchange. Parties to
the contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting
contracts.

The Fund may trade in the following types of derivative contracts.

Futures Contracts

The Fund may buy or sell the following type
s of futures contracts: foreign currency, securities and securities indices.

Options

The Fund may:

o Buy call options on foreign currencies, securities, securities indices
and futures contracts involving these items to manage interest rate and currency
risks; and

o Buy put options on foreign currencies, securities, securities indices and
futures contracts involving these items to manage interest rate and currency
risks.

When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts.

Swaps

Interest Rate Swaps

Currency Swaps

Currency swaps are contracts which provide for interest payments in
different currencies. The parties might agree to exchange the notional principal
amount as well.

Caps and Floors

Caps and Floors are contracts in which one party agrees to make payments
only if an interest rate or index goes above (Cap) or below (Floor) a certain
level in return for a fee from the other party.

Hybrid Instruments

The risks of investing in hybrid instruments reflect a combination of the
risks of investing in securities, options, futures and currencies, and depend
upon the terms of the instrument. Thus, an investment in a hybrid instrument may
entail significant risks in addition to those associated with traditional fixed
income or convertible securities. Hybrid instruments are also potentially more
volatile and carry greater market risks than traditional instruments.

Special Transactions

Repurchase Agreements

Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

Repurchase agreements are subject to credit risks.

Reverse Repurchase Agreements

Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase agreement
may be viewed as a type of borrowing by the Fund. Reverse repurchase agreements
are subject to credit risks. In addition, reverse repurchase agreements create
leverage risks because the Fund must repurchase the underlying security at a
higher price, regardless of the market value of the security at the time of
repurchase.

Delayed Delivery Transactions

Securities Lending

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund
must pay interest to the borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on loan,
but it will terminate a loan in anticipation of any important vote. The Fund may
pay administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.

Securities lending activities are subject to market risks and credit risks.

Asset Coverage

In order to secure its obligations in connection with derivatives contracts
or special transactions, the Fund will either own the underlying assets, enter
into an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

Hedging

INVESTMENT RISKS

There are many factors which may effect an investment in the Fund. The
Fund's principal risks are described in its prospectus. Additional risk factors
are outlined below.

Liquidity Risks

o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, the Fund may have to accept a lower price
to sell a security, sell other securities to raise cash or give up an investment
opportunity, any of which could have a negative effect on the Fund's
performance. Infrequent trading of securities may also lead to an increase in
their price volatility.

o Liquidity risk also refers to the possibility that the Fund may not be
able to sell a security or close out a derivative contract when it wants to. If
this happens, the Fund will be required to continue to hold the security or keep
the position open, and the Fund could incur losses.

o OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

Bond Market Risks

o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.

o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

<PAGE>

Credit Risks

o Credit risk is the possibility that an issuer will default on a security
by failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.

o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely upon the Adviser's credit assessment.

o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a security
and the yield of a U.S. Treasury security with a comparable maturity (the
spread) measures the additional interest paid for risk. Spreads may increase
generally in response to adverse economic or market conditions. A security's
spread may also increase if the security's rating is lowered, or the security is
perceived to have an increased credit risk. An increase in the spread will cause
the price of the security to decline.

o Credit risk includes the possibility that a party to a transaction
involving the Fund will fail to meet its obligations. This could cause the Fund
to lose the benefit of the transaction or prevent the Fund from selling or
buying other securities to implement its investment strategy.

Risks Associated with Noninvestment Grade Securities

Sector Risks

o Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain sector
may underperform other sectors or as the market as a whole. As the Adviser
allocates more of the Fund's portfolio holdings to a particular sector, the
Fund's performance will be more susceptible to any economic, business or other
developments which generally affect that sector.

INVESTMENT LIMITATIONS
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

Investing in Commodities

Investing 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

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

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."

<PAGE>

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:

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

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

o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

o for short-term obligations, according to the mean between bid and asked
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 or at fair market value as determined
in good faith by the Board; and

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

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, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

The Fund values 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. Options traded in the over-the-counter market are valued
according to the mean between the last bid and the last asked price for the
option as provided by an investment dealer or other financial institution that
deals in the option. The Board may determine in good faith that another method
of valuing such investments is necessary to appraise their fair market value.

Trading in Foreign Securities

WHAT DO SHARES COST?

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.

REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows.

Quantity Discounts

Accumulated Purchases

If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.

Concurrent Purchases

You can combine concurrent purchases of the same Share class of two or more
Federated Funds in calculating the applicable sales charge.

Letter of Intent

Reinvestment Privilege

You may reinvest, within 120 days, your redemption proceeds at the next
determined NAV, without any sales charge.

Purchases by Affiliates of the Fund

The following individuals and their immediate family members may buy Shares
at NAV without any sales charge because there are nominal sales efforts
associated with their purchases:

o the Directors, employees, and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates;

o Employees of State Street Bank Pittsburgh who started their employment on
January 1, 1998, and were employees of Federated Investors, Inc. (Federated) on
December 31, 1997;