1933 Act File No. 33-48847
                                                     1940 Act File No. 811-07021

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933               X

   Pre-Effective Amendment No.       ..................

   Post-Effective Amendment No.  26  ..................               X

                                           and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940       X

   Amendment No.  27  .................................               X

                     FEDERATED INVESTMENT SERIES FUNDS, INC.

               (Exact Name of Registrant as Specified in Charter)
                            Federated Investors Funds
                              5800 Corporate Drive
                       Pittsburgh, Pennsylvania 15237-7000
                    (Address of Principal Executive Offices)


                           John W. McGonigle, Esquire,
                            Federated Investors Tower
                               1001 Liberty Avenue
                       Pittsburgh, Pennsylvania 15222-3779
                     (Name and Address of Agent for Service)
                (Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

  x_  immediately upon filing pursuant to paragraph (b)
      on __________________ pursuant to paragraph (b)
      60 days after filing pursuant to paragraph (a) (i)
      on_____________ 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

Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Bond Fund

A Portfolio of Federated Investment Series Funds, Inc.

PROSPECTUS

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January 31, 2005

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CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
CLASS F SHARES

A mutual fund seeking to provide as high a level of current income as is consistent with the preservation of capital by investing primarily in a professionally managed, diversified portfolio of fixed income securities.

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

Not FDIC Insured * May Lose Value * No Bank Guarantee

CONTENTS

Risk/Return Summary	1
What are the Fund’s Fees and Expenses?	5
What are the Fund’s Investment Strategies?	6
What are the Principal Securities in Which the Fund Invests?	9
What are the Specific Risks of Investing in the Fund?	15
What Do Shares Cost?	17
How is the Fund Sold?	25
How to Purchase Shares	26
How to Redeem and Exchange Shares	28
Account and Share Information	32
Who Manages the Fund?	34
Legal Proceedings	36
Financial Information	37

Risk/Return Summary

WHAT IS THE FUND’S INVESTMENT OBJECTIVE?

The Fund’s investment objective is to provide as high a level of current income as is consistent with the preservation of capital. While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND’S MAIN INVESTMENT STRATEGIES?

The Fund invests primarily in a diversified portfolio of investment grade fixed income securities. The Adviser seeks to enhance the Fund’s performance by allocating relatively more of its portfolio to the security type that the Adviser expects to offer the best balance between current income and risk. The Fund may invest up to 35% of its assets in fixed income securities rated below investment grade. The Adviser may lengthen or shorten duration from time to time based on its interest rate outlook, but the Fund has no set duration parameters. Duration measures the price sensitivity of a fixed income security to changes in interest rates.

The Fund may invest in derivative contracts to implement its investment strategies as more fully described herein. The Fund intends to invest in the securities of U.S. government-sponsored entities (GSEs), including GSE securities that are not backed by the full faith and credit of the United States government, such as those issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Federal Home Loan Bank System. These entities are, however, supported through federal subsidies, loans or other benefits. The Fund may also invest in GSE securities that are supported by the full faith and credit of the U.S. government, such as those issued by the Government National Mortgage Association. Finally, the Fund may invest in a few GSE securities that have no explicit financial support, but which are regarded as having implied support because the federal government sponsors their activities. Such securities include those issued by the Farm Credit System and the Financing Corporation.

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:

• Interest Rate Risks. Prices of fixed income securities generally fall when interest rates rise. Interest rate changes have a greater effect on the price of fixed income securities with longer durations.
• Credit Risks. There is a possibility that issuers of securities in which the Fund may invest may default in the payment of interest or principal on the securities when due, which would cause the Fund to lose money.
• Liquidity Risks. The fixed income securities in which the Fund invests may be less readily marketable and may be subject to greater fluctuation in price than other securities. OTC derivative contracts generally carry greater liquidity risk than exchange-traded contracts.
• Risks Associated with Non-Investment Grade Securities. The Fund may invest a portion of its assets in securities rated below investment grade which may be subject to greater interest rate, credit and liquidity risks than investment grade securities.
• Risks of Foreign Investing. Because the Fund invests in securities issued by foreign companies, the Fund’s share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards than would otherwise be the case.
• Currency Risks. Exchange rates for currencies fluctuate daily. The combination of currency risk and market risks tends to make securities traded in foreign markets more volatile than securities traded exclusively in the U.S.
• Leverage Risks. Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain.

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• Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund’s use of derivative contracts involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying asset or if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivatives contracts and hybrid instruments may be mispriced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, the Fund may enter into combinations of derivative contracts in an attempt to benefit from changes in the prices of those derivative contracts (without regard to changes in the value of the security, index or currency underlying the derivative). Finally, derivative contracts and hybrid instruments may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. Derivative contracts and hybrid instruments may also involve other risks described in this prospectus, such as interest rate, credit, liquidity and leverage risks.

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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

The performance information shown below will help you analyze the Fund’s investment risks in light of its historical returns. The bar chart shows the variability of the Fund’s Class F Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund’s performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

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The total returns shown in the bar chart do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower.

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Within the period shown in the bar chart, the Fund’s Class F Shares highest quarterly return was 6.09% (quarter ended June 30, 1995). Its lowest quarterly return was (2.17)% (quarter ended June 30, 2004).

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Average Annual Total Return Table

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The Average Annual Total Returns for the Fund’s Class A, Class B, Class C and Class F Shares are reduced to reflect applicable sales charges. Return Before Taxes is shown for all classes. In addition, Return After Taxes is shown for the Fund’s Class F Shares to illustrate the effect of federal taxes on the Fund returns. Actual after tax returns depend on each investor’s personal tax situation, and are likely to differ from those shown. The table also shows returns for the Lehman Brothers Credit Bond Index (LBCB), a broad-based market index, and the Lipper Corporate Debt Funds BBB Rated Average (LCDBBB), an average of funds with similar investment objectives. The LBCB is comprised of a large universe of bonds issued by industrial utility and financial companies which have a minimum ratings of Baa by Moody’s Investors, Service, Inc., BBB by Standard and Poor’s Ratings Group or, in the case of bank bonds not rated by either of the previously mentioned services, BBB by Fitch IBCA, Inc. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund’s performance. Indexes are unmanaged, and it is not possible to invest directly in an index. The LCDBBB represents the average of total returns reported by all mutual funds designed by Lipper, Inc. as falling into the respective category.

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(For the periods ended December 31, 2004)

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	1 Year	5 Years	10 Years	Start of Performance1
Class A Shares:
Return Before Taxes	1.93%	6.73%	--	6.32%
Class B Shares:
Return Before Taxes	0.46%	6.58%	--	6.14%
Class C Shares:
Return Before Taxes	3.83%	6.65%	--	5.90%
Class F Shares:
Return Before Taxes	4.75%	7.49%	7.60%
Return After Taxes on Distributions2	2.55%	4.70%	4.67%
Return After Taxes on Distributions and Sale of Fund Shares2	3.04%	4.65%	4.65%
LBCB	5.24%	8.63%	8.41%
LCDBBB	5.30%	7.50%	7.59%

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1 The start of performance dates for Class A, Class B and Class C shares was June 28, 1995.

2 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

What are the Fund’s Fees and Expenses?

FEDERATED BOND 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, Class B, Class C and Class F Shares.

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Shareholder Fees	Class A	Class B	Class C	Class F
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	4.50%	None	1.00%	1.00%
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	None	5.50%	1.00%	1.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)	None	None	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None	None	None
Exchange Fee	None	None	None	None
Annual Fund Operating Expenses (Before Waivers)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee2	0.75%	0.75%	0.75%	0.75%
Distribution (12b-1) Fee	0.25%3	0.75%	0.75%	None
Shareholder Services Fee4	0.25%4	0.25%	0.25%	0.25%
Other Expenses	0.22%	0.22%	0.22%	0.22%
Total Annual Fund Operating Expenses	1.47%	1.97%5	1.97%	1.22%
1 The percentages shown are based on expenses for the entire fiscal year ended November 31, 2004. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not contractually obligated to do so, the Adviser, distributor and shareholder services provider waived certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended November 30, 2004.
Total Waivers of Fund Expenses	0.42%	0.12%	0.12%	0.14%
Total Actual Annual Fund Operating Expenses (after waivers)	1.05%	1.85%	1.85%	1.08%
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 0.63% for the fiscal year ended November 30, 2004.
3 Class A Shares did not pay or accrue the distribution (12b-1) fee during the fiscal year ended November 30, 2004. Class A Shares have no present intention of paying or accruing the distribution (12b-1) fee for the fiscal year ended November 30, 2005.
4 A portion of the shareholder services fee for Class A and Class F Shares has been voluntarily waived. This voluntary waiver can be terminated at any time. The shareholder services fee paid by the Fund’s Class A Shares and Class F Shares (after voluntary waiver) was 0.20% and 0.23% for the fiscal year ended November 30, 2004.
5 After Class B Shares have been held for eight years from the date of purchase, they will automatically convert to Class A Shares on or about the last day of the following month. Class A Shares pay lower operating expenses than Class B Shares.

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EXAMPLE

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

The Example assumes that you invest $10,000 in the Fund’s Class A, B, C and F 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, B, C and F Shares operating expenses are before waivers as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

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Share Class	1 Year	3 Years	5 Years	10 Years
Class A:
Expenses assuming redemption	$593	$894	$1,217	$2,128
Expenses assuming no redemption	$593	$894	$1,217	$2,128
Class B:
Expenses assuming redemption	$750	$1,018	$1,262	$2,167
Expenses assuming no redemption	$200	$618	$1,062	$2,167
Class C:
Expenses assuming redemption	$398	$712	$1,152	$2,373
Expenses assuming no redemption	$298	$712	$1,152	$2,373
Class F:
Expenses assuming redemption	$323	$583	$764	$1,563
Expenses assuming no redemption	$223	$483	$764	$1,563

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What are the Fund’s Investment Strategies?

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Under normal market conditions, the Fund invests primarily in a diversified portfolio of investment grade debt securities, including corporate debt securities and U.S. government obligations. The Fund may invest up to 35% of its portfolio in non-investment grade debt securities. Investment grade debt securities are rated in one of the four highest categories (BBB- or higher) by a nationally recognized statistical rating organization (NRSRO), or if unrated, of comparable quality as determined by the Adviser. A description of the various types of securities in which the Fund principally invests, and their risks, immediately follows this strategy section.

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The Adviser seeks to enhance the Fund’s performance by allocating relatively more of its portfolio to the security type that the Adviser expects to offer the best balance between current income and risk and thus offers the greatest potential for return. The allocation process is based on the Adviser’s continuing analysis of a variety of economic and market indicators in order to arrive at the projected yield “spread” of each security type. (The spread is the difference between the yield of a security versus the yield of a U.S. treasury security with a comparable average life.) The security’s projected spread is weighed against the spread the security can currently be purchased for, as well as the security’s credit risk (in the case of corporate securities) in order to complete the analysis.

Corporate debt securities generally offer higher yields than U.S. government securities to compensate for credit risk. The Adviser invests the Fund’s portfolio, seeking the higher relative returns of corporate debt securities, when available, while attempting to limit the associated credit risks. The Adviser attempts to manage the Fund’s credit risk by selecting corporate debt securities that are less likely to default in the payment of principal and interest. The Adviser looks at a variety of factors, including macroeconomic analysis and corporate earnings analysis, among others, to determine which business sectors and credit ratings are most advantageous for investment by the Fund. In selecting individual corporate fixed income securities, the Adviser analyzes a company’s business, competitive position, and general financial condition to assess whether the security’s credit risk is commensurate with its potential return.

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The Adviser may invest a portion of the Fund’s assets in corporate debt securities of companies based outside the United States, to diversify the Fund’s holdings and to gain exposure to the foreign market. Securities of foreign companies may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards than those of United States companies. While substantially all of the foreign securities in which the Fund invests will be U.S. dollar denominated, the Fund may invest in foreign debt securities that are denominated foreign currencies.

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The Adviser may lengthen or shorten duration from time-to-time based on its interest rate outlook, but the Fund has no set duration parameters. If the Adviser expects interest rates to decline, it will generally lengthen the Fund’s duration, and if the Adviser expects interest rates to increase, it will generally shorten the Fund’s duration. The Adviser formulates its interest rate outlook and otherwise attempts to anticipate changes in economic and market conditions by analyzing a variety of factors, such as:

• current and expected U.S. growth;
• current and expected interest rates and inflation;
• the U.S. Federal Reserve Board’s monetary policy; and
• changes in the supply of or demand for U.S. government securities.

There is no assurance that the Adviser’s efforts to forecast market interest rates, and assess relative risks and the impact of market interest rates on particular securities, will be successful.

The Adviser may opportunistically invest in derivative contracts, such as swaps, options, futures, and forward contracts, to efficiently implement the Fund’s overall investment strategies. The following examples illustrate some, but not all, of the specific ways in which the Fund may use derivative contracts. First, the Adviser may use derivatives to increase or decrease the Fund’s exposure to an underlying asset without actually buying or selling the asset. Second, the Fund may invest in derivatives that are designed to have risk/return characteristics similar to an index or another diversified basket of individual securities, as a way to quickly or cost effectively adjust the Fund’s exposure to a sector of the fixed income market. Third, the Adviser may use derivatives to obtain exposure to an issuer that does not have publicly traded debt. Fourth, the fund may enter into combinations of derivative contracts with the goal of benefiting from changes in the prices of those derivative contracts (without regard to changes in the value of the security, index or currency underlying the derivative). Finally, the Adviser may use derivatives to implement the Fund’s hedging strategies, as more fully described below. There is no guarantee that any investment strategy involving the use of a derivative will work as intended.

Because the Fund refers to fixed income investments in its name, it will notify shareholders at least 60 days in advance of any change in its investment policies that would enable the Fund to normally invest less than 80% of its assets in fixed income investments.

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 also attempt to hedge by using combinations of different derivatives contracts, or derivatives contracts and securities. The Fund’s ability to hedge may be limited by the costs of the derivatives contracts. 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.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by investing its assets in cash and shorter-term 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?

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.

Agency Securities

Agency securities are issued or guaranteed by a federal agency or other government sponsored entity (GSE) acting under federal authority. Some GSE securities are supported by the full faith and credit of the United States. These include the Government National Mortgage Association, Small Business Administration, Farm Credit System Financial Assistance Corporation, Farmer’s Home Administration, Federal Financing Bank, General Services Administration, Department of Housing and Urban Development, Export-Import Bank, Overseas Private Investment Corporation, and Washington Metropolitan Area Transit Authority Bonds.

Other GSE securities receive support through federal subsidies, loans or other benefits. For example, the U.S. Treasury is authorized to purchase specified amounts of securities issued by (or otherwise make funds available to) the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Student Loan Marketing Association, and Tennessee Valley Authority in support of such obligations.

A few GSE securities have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. These include the Farm Credit System, Financing Corporation, and Resolution Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as Treasury securities. A Fund treats mortgage-backed securities guaranteed by a GSE as if issued or guaranteed by a federal agency.

Although such a guarantee protects against credit risks, it does not reduce market and prepayment risks.

Corporate Debt Securities

Corporate debt securities are fixed income securities issued by businesses. Notes, bonds, debentures and commercial paper are the most prevalent types of corporate debt securities. The Fund may also purchase interests in bank loans to companies. The credit risks of corporate debt securities vary widely among issuers.

In addition, the credit risk of an issuer’s debt security may vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of senior securities may receive amounts otherwise payable to the holders of subordinated securities. Some subordinated securities, such as trust preferred and capital securities notes, also permit the issuer to defer payments under certain circumstances. For example, insurance companies issue securities known as surplus notes that permit the insurance company to defer any payment that would reduce its capital below regulatory requirements.

Derivative Contracts

Derivative contracts are financial instruments that require payments based upon changes in the values of designated (or underlying) securities, commodities, currencies, financial indices or other assets or instruments. 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 or instrument. 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 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 on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the underlying asset or instrument, derivative contracts may increase or decrease the Fund’s exposure to interest rate, stock market, currency and credit risks, and may also expose the fund to liquidity and leverage risks. OTC contracts also expose the Fund to credit risks in the event that a counterparty defaults on the contract.

The Fund may trade in the following types of derivative contracts, including combinations thereof:

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. The Fund has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under that Act. Futures contracts traded OTC are frequently referred to as forward contracts. The Fund can buy or sell financial futures, index futures, currency futures and foreign currency forward contracts.

OPTIONS

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Options are rights to buy or sell an underlying asset or instrument for a specified price (the exercise price) during, or at the end of, a specified period. The seller (or writer) of the option receives a payment, or premium, from the buyer, which the writer keeps regardless of whether the buyer uses (or exercises) the option. A call option gives the holder (buyer) the right to buy the underlying asset from the seller (writer) of the option. A put option gives the holder the right to sell the underlying asset to the writer of the option. Options can trade on exchanges or in the OTC market and may be bought or sold on a wide variety of underlying assets or instruments, including financial indices, individual securities, and other derivative instruments, such as futures contracts. The Fund may buy or sell options on indexes, futures contracts, currencies (both U.S. and foreign) and individual securities; provided, however, that the Fund may not sell an option on a security that it does not own.

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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. Common types of swaps in which the Fund may invest include interest rate swaps, total return swaps, credit default swaps, currency swaps, and caps and floors.

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:

• it is organized under the laws of, or has a principal office located in, another country;
• the principal trading market for its securities is in another country; or
• 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 another country.

Substantially all of the Fund’s foreign securities are denominated in U.S. dollars.

SPECIAL TRANSACTIONS

Investing In Securities Of Other Investment Companies

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The Fund may invest its assets in securities of other investment companies, including the securities of affiliated money market funds, as an efficient means of carrying out its investment policies and managing its uninvested cash. The Fund may also invest in mortgage backed and high yield securities primarily by investing in another investment company (which is not available for general investment by the public) that owns those securities and that is advised by an affiliate of the Adviser. The Fund may also invest in such securities directly. These other investment companies are managed independently of the Fund and may incur additional administrative expenses. Therefore, any such investment by the Fund may be subject to duplicate expenses. However, the Adviser believes that the benefits and efficiencies of this approach should outweigh the additional expenses.

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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 interest rate risks and credit risks.

Investment Ratings

Investment grade securities include fixed income securities rated AAA, the highest rating category, through BBB by a NRSRO and may include, if unrated, those securities determined to be of equivalent quality by the Adviser. Non-investment grade fixed income securities are rated BB or below by a NRSRO or are unrated. When the Fund invests in fixed income securities some will be non-investment grade at the time of purchase. Unrated securities will be determined by the Adviser to be of like quality and may have greater risk but a higher yield than comparable rated securities.

Securities rated BBB or below by Standard and Poor’s or Baa by Moody’s Investors Service have speculative characteristics.

If a security is downgraded below the minimum quality grade discussed above, the Adviser will reevaluate the security, but will not be required to sell it.

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.

Credit Linked Notes

A credit linked note (“CLN”) is a type of hybrid instrument in which a special purpose entity issues a structured note that is intended to replicate a corporate bond or a portfolio of corporate bonds.

Asset Coverage

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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 in accordance with the Adviser’s segregation policies. Unless the Fund has other readily marketable assets to set aside, it cannot trade assets used to secure such obligations without 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.

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What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

• Prices of fixed income securities rise and fall in response to changes in the interest rate paid by similar securities. Generally, when interest rates rise, prices of fixed income securities fall. However, market factors, such as the demand for particular fixed income securities, may cause the price of certain fixed income securities to fall while the prices of other securities rise or remain unchanged.
• 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

• 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.
• Many fixed income securities receive credit ratings from services such as Standard & Poor’s and Moody’s Investor Service. These services assign ratings to securities by assessing the likelihood of issuer default. Lower credit ratings correspond to higher perceived credit risk and higher credit ratings correspond to lower perceived credit risk. Credit ratings do not provide assurance against default or other loss of money. If a security has not received a rating, the Fund must rely entirely upon the Adviser’s credit assessment.
• 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.
• 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.

LIQUIDITY RISKS

• Trading opportunities are more limited for fixed income securities that have not received any credit ratings, have received ratings below investment grade or are not widely held. 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.
• OTC derivative contracts generally carry greater liquidity risk than exchange-traded contracts.

CURRENCY RISKS

• Exchange rates for currencies fluctuate daily. The combination of currency risk and market risks tends to make securities traded in foreign markets more volatile than securities traded exclusively in the U.S.

LEVERAGE RISKS

• Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain.
• Investments can have these same results if their returns are based on a multiple of a specified index, security, or other benchmark.

RISKS ASSOCIATED WITH NON-INVESTMENT GRADE SECURITIES

• 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.

RISKS OF FOREIGN INVESTING

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

RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

• The Fund’s use of derivative contracts involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying asset or if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivatives contracts and hybrid instruments may be mispriced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Finally, derivative contracts and hybrid instruments may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. Derivative contracts and hybrid instruments may also involve other risks described in this prospectus, such as interest rate, credit, liquidity and leverage risks.

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 (as described in this prospectus), it is processed at the next calculated net asset value (NAV) plus any applicable front-end sales charge (public offering price).

When the Fund holds foreign securities that trade in foreign markets on days the NYSE is closed, the value of the Fund’s assets may change on days you cannot purchase or redeem Shares. NAV is determined at the end of regular trading (normally 4:00 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 of certain local newspapers under “Federated.”

The Fund generally values fixed income securities according to prices furnished by an independent pricing service, except that fixed income securities with remaining maturities of less than 60 days at the time of purchase may be valued at amortized cost. Prices furnished by an independent pricing service are intended to be indicative of the mean between the bid and asked prices currently offered to institutional investors for the securities.

If prices are not available from an independent pricing service, securities traded in the over-the-counter market are generally valued according to the mean between the last bid and the last asked price for the security as provided by an investment dealer or other financial institution that deals in the security.

Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board. The Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Fund’s Adviser determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. For securities normally priced at their last sale price in a foreign market, such events can occur between the close of trading in the foreign market and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events. For securities of foreign issuers, such events could also include political or other developments affecting the economy or markets in which the issuer conducts its operations or its securities are traded.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, by an independent pricing service, or based on market quotations.

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.

	Minimum Initial/Subsequent Investment Amounts1	Maximum Sales Charge
Shares Offered		Front-End Sales Charge2	Contingent Deferred Sales Charge3
Class A	$1,500/$100	4.50%	0.00%
Class B	$1,500/$100	None	5.50%
Class C	$1,500/$100	1.00%	1.00%
Class F	$1,500/$100	1.00%	1.00%

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 (SIP) is $50. Investment professionals may impose higher or lower minimum investment requirements on their customers than those imposed by the Fund. Orders for $100,000 or more of Class B Shares or $1 million or more of Class C Shares will be invested in Class A Shares instead of Class B Shares or Class C 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. After Class B Shares have been held for eight years from the date of purchase, they will automatically convert to Class A Shares on or about the last day of the following month. 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.”

3 See “Sales Charge When You Redeem.”

As shown in the table above, each class of Shares has a different sales charge structure. In addition, the ongoing annual operating expenses (“expense ratios”), as well as the compensation payable to investment professionals, also vary among the classes. Before you decide which class to purchase, you should review the different charges and expenses of each class carefully, in light of your personal circumstances, and consult with your investment professional.

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Among the important factors to consider are the amount you plan to invest and the length of time you expect to hold your investment. You should consider, for example, that it may be possible to reduce the front-end sales charges imposed on purchases of Class A Shares and Class F Shares. Among other ways, Class A Shares and Class F Shares have a series of “breakpoints,” which means that the front-end sales charges decrease (and can be eliminated entirely) as the amount invested increases. (The breakpoint schedule is set out below under “Sales Charge When You Purchase.”) On the other hand, Class B Shares do not have front-end sales charges, but the deferred sales charges imposed on redemptions of Class B Shares do not vary at all in relation to the amounts invested. Rather, these charges decrease with the passage of time (ultimately going to zero after seven years). Finally, Class C Shares bear a relatively low front-end sales charge and a contingent deferred sales charge only if redeemed within one year after purchase; however, the asset-based 12b-1 fees charged to Class C Shares are greater than those charged to Class A Shares and Class F Shares and comparable to those charged to Class B Shares.

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You should also consider that the expense ratio for Class A Shares will be lower than that for Class B (or Class C) Shares. Thus, the fact that no front-end charges are ever imposed on purchases of Class B Shares (or that a relatively low front-end charge is imposed on purchases of Class C Shares) does not always make them preferable to Class A Shares.

SALES CHARGE WHEN YOU PURCHASE

The following table lists the sales charges which will be applied to your Share purchase, subject to the breakpoint discounts indicated in the table and described below.

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Class A Shares:
Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV
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%
Class C Shares:
All Purchases	1.00%	1.01%
Class F Shares:
Less than $1 million	1.00%	1.01%
$1 million or greater	0.00%	0.00%

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

REDUCING THE SALES CHARGE WITH BREAKPOINT DISCOUNTS

Your investment may qualify for reduction or elimination of the sales charge, also known as a breakpoint discount. The breakpoint discounts offered by the Fund are indicated in the tables above. You or your investment professional must notify the Fund’s Transfer Agent of eligibility for any applicable breakpoint discount at the time of purchase.

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In order to receive the applicable breakpoint discount, it may be necessary at the time of purchase for you to inform your investment professional or the Transfer Agent of the existence of other accounts in which there are holdings eligible to be aggregated to meet a sales charge breakpoint (“Qualifying Accounts”). Qualifying Accounts mean those Share accounts in the Federated funds held directly or through an investment professional or a through a single-participant retirement account by you, your spouse, your parents (if you are under age 21) and/or your children under age 21, which can be linked using tax identification numbers (TINs), social security numbers (SSNs) or (effective March 1, 2005) broker identification numbers (BINs). Accounts held through 401(k) plans and similar multi-participant retirement plans, or through “Section 529” college savings plans or those accounts which cannot be linked using TINs, SSNs or BINs, are not Qualifying Accounts.

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In order to verify your eligibility for a breakpoint discount, you will be required to provide to your investment professional or the Transfer Agent certain information on your New Account Form and may be required to provide account statements regarding Qualifying Accounts. If you purchase through an investment professional, you may be asked to provide additional information and records as required by the investment professional. Failure to provide proper notification or verification of eligibility for a breakpoint discount may result in your not receiving a breakpoint discount to which you are otherwise entitled. Breakpoint discounts apply only to your current purchase and do not apply retroactively to previous purchases. The sales charges applicable to the Shares offered in this prospectus, and the breakpoint discounts offered with respect to such Shares, are described in full in this prospectus. Because the prospectus is available on Federated’s website free of charge, Federated does not disclose this information separately on the website.

Contingent upon notification to the Transfer Agent, the sales charge at purchase of Class A Shares and Class F Shares only, may be reduced or eliminated by:

Larger Purchases

• purchasing Class A or Class F Shares in greater quantities to reduce the applicable sales charge;

Concurrent and Accumulated Purchases (Effective through February 28, 2005)

• combining concurrent purchases of and/or current investments in Class A or Class F Shares as applicable, of any Federated fund made or held by Qualifying Accounts; the purchase amount used in determining the sales charge on your additional Class A or Class F Share purchase will be calculated by multiplying the maximum public offering price times the number of Shares of the same Class of any Federated fund currently held in Qualifying Accounts and adding the dollar amount of your current purchase;

Concurrent and Accumulated Purchases (Effective March 1, 2005)

• combining concurrent purchases of and/or current investments in Class A, Class B, Class C, Class F and Class K Shares of any Federated fund made or held by Qualifying Accounts; the purchase amount used in determining the sales charge on your additional Share purchase will be calculated by multiplying the maximum public offering price times the number of Class A, Class B, Class C, Class F and Class K Shares of any Federated fund currently held in Qualifying Accounts and adding the dollar amount of your current purchase; or

Letter of Intent

• signing a letter of intent to purchase a qualifying amount of Class A or Class F Shares within 13 months (call your investment professional or the Fund for more information). 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.

ELIMINATING THE SALES CHARGE

Contingent upon notification to the Transfer Agent, the sales charge will be eliminated when you purchase Shares:

• through a financial intermediary that did not receive a dealer reallowance on the purchase;
• with reinvested dividends or capital gains;
• as a shareholder that originally became a shareholder of the Fund pursuant to the terms of an agreement and plan of reorganization which permits shareholders to acquire Shares at NAV;
• as a Federated Life Member (Federated shareholders who originally were issued shares through the “Liberty Account,” which was an account for the Liberty Family of Funds on February 28, 1987, or who invested through an affinity group prior to August 1, 1987, into the Liberty Account) (Class A Shares only);
• as a Director or employee of the Fund, the Adviser, the Distributor and their affiliates, an employee of any investment professional that sells Shares according to a sales agreement with the Distributor, an immediate family member of these individuals or a trust, pension or profit-sharing plan for these individuals; or
• pursuant to the exchange privilege.

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).

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

• Shares that are not subject to a CDSC; and
• 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).

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

Class A Shares (Purchase amount of $1 million or greater):
A CDSC 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.
Class F Shares:
Purchase Amount	Shares Held	CDSC
Up to $2 million	4 years or less	1.00%
$2 - $5 million	2 years or less	0.50%
$5 million or more	1 year or less	0.25%

If your investment qualifies for a reduction or elimination of the CDSC, you or your investment professional must notify the Transfer Agent at the time of redemption. If the Transfer Agent is not notified, the CDSC will apply.

Contingent upon notification to the Transfer Agent, you will not be charged a CDSC when redeeming Shares:

• following the death of the last surviving shareholder on the account or your post-purchase disability, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986 (the beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder on the account);
• representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70½;
• purchased within 120 days of a previous redemption of Shares, to the extent that the value of the Shares purchased was equal to or less than the value of the previous redemption;
• purchased by Directors and employees of the Fund, the Adviser, the Distributor and their affiliates, by employees of an investment professional that sells Shares according to a sales agreement with the Distributor, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;
• purchased through an investment professional that did not receive an advance commission on the purchase;
• purchased with reinvested dividends or capital gains;
• redeemed by the Fund when it closes an account for not meeting the minimum balance requirements;
• purchased pursuant to the exchange privilege if the Shares were held for the applicable CDSC holding period (the holding period on the shares purchased in the exchange will include the holding period of the shares sold in the exchange);

Class B Shares only

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

Class F Shares only

• representing a total or partial distribution from a qualified plan, which does not include account transfers, rollovers, or redemptions for the purpose of reinvestment. For these purposes, qualified plan does not include an Individual Retirement Account, Keogh Plan or custodial account following retirement.

How is the Fund Sold?

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

The Fund’s Distributor, Federated Securities Corp., markets the Shares described in this prospectus to institutions or to individuals, directly or through investment professionals.

When the Distributor receives marketing fees and sales charges, it may pay some or all of them to investment professionals. 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, administration and customer servicing of the Fund’s Class A, Class B and Class C 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.

SERVICE FEES

The Fund may pay fees (Service Fees) to financial institutions or to Federated Shareholder Services Company (FSSC), a subsidiary of Federated, for providing services to shareholders and maintaining shareholder accounts. Under certain agreements, rather than paying financial institutions directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial institutions.

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial institutions that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial institution or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Adviser). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial institution sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial institution. These payments may be in addition to payments made by the Fund to the financial institution under a Rule 12b-1 Plan and/or Service Fees arrangement. You can ask your financial institution for information about any payments it receives from the Distributor or the Fund and any services provided.

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

• Establish an account with the investment professional; and
• Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 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

• Establish your account with the Fund by submitting a completed New Account Form; and
• 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 incurred by the Fund or Federated Shareholder Services Company, the Fund’s transfer agent.

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 send it to:

The Federated Funds
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, send it to:

The Federated Funds
66 Brooks Drive
Braintree, MA 02184

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

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 SIP section of the New Account Form or by contacting the Fund or your investment professional.

BY AUTOMATED CLEARING HOUSE (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.

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

• through an investment professional if you purchased Shares through an investment professional; or
• 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 4:00 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 simply calling the Fund at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

The Federated Funds
66 Brooks Drive
Braintree, MA 02184

All requests must include:

• Fund Name and Share Class, account number and account registration;
• amount to be redeemed or exchanged;
• signatures of all shareholders exactly as registered; and
• 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 by a financial institution which is a participant in a Medallion signature guarantee program if:

• your redemption will be sent to an address other than the address of record;
• your redemption will be sent to an address of record that was changed within the last 30 days;
• a redemption is payable to someone other than the shareholder(s) of record; or
• if exchanging (transferring) into another fund with a different shareholder registration.

A Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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:

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

• to allow your purchase to clear;
• during periods of market volatility; or
• 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 PRIVILEGE

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

• ensure that the account registrations are identical;
• meet any minimum initial investment requirements; and
• 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.

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The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information – Frequent Trading Policies.”

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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 Class A 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:

• you redeem 12% or less of your account value in a single year;
• you reinvest all dividends and capital gains distributions; and
• 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 monthly, quarterly, or 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 monthly 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 the record date for 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 record date for 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 dividends. Redemptions and exchanges are taxable sales. Please consult your tax adviser regarding your federal, state and local tax liability.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

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The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund’s fair valuation procedures are intended in part to discourage short-term trading by reducing the potential for market-timing strategies to succeed. See “What do Shares Cost?” The Fund also monitors trading in Fund Shares in an effort to identify potential market-timing or other disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or Adviser may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

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The Fund’s objective is that its fees and restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, particularly where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund’s portfolio holdings is available in the “Products” section of the Federated Investors website at www.federatedinvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten holdings, recent purchase and sale transactions and percentage breakdowns of the portfolio by sector and credit quality.

To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

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You may also access from the “Products” section of the website portfolio information as of the end of the Fund’s fiscal quarters. The Fund’s annual and semiannual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

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Who Manages the Fund?

The Board of Directors (the “Board”) governs the Fund. The Board selects and oversees the Adviser, Federated Investment Management Company. The Adviser manages the Fund’s assets, including buying and selling portfolio securities. Federated Advisory Services Company (FASC), an affiliate of the Adviser, provides certain support services to the Adviser. The fee for these services is paid by the Adviser and not by the Fund. The address of the Adviser and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Adviser and other subsidiaries of Federated advise approximately 133 equity, fixed-income and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $179 billion in assets as of December 31, 2004. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,385 employees. Federated provides investment products to more than 5,700 investment professionals and institutions.

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THE FUND’S PORTFOLIO MANAGERS ARE:

Joseph M. Balestrino

Joseph M. Balestrino has been the Fund’s Portfolio Manager since September 1993. He is Vice President of the Corporation. Mr. Balestrino joined Federated in 1986 and has been a Senior Portfolio Manager and Senior Vice President of the Fund’s Adviser since 1998. He was a Portfolio Manager and a Vice President of the Fund’s Adviser from 1995 to 1998. Mr. Balestrino served as a Portfolio Manager and an Assistant Vice President of the Adviser from 1993 to 1995. Mr. Balestrino is a Chartered Financial Analyst and received his Master’s Degree in Urban and Regional Planning from the University of Pittsburgh.

Mark E. Durbiano

Mark E. Durbiano has been the Fund’s Portfolio Manager since June 1992. Mr. Durbiano joined Federated in 1982 and has been a Senior Portfolio Manager and a Senior Vice President of the Fund’s Adviser since 1996. From 1988 through 1995, Mr. Durbiano was a Portfolio Manager and a Vice President of the Fund’s Adviser. Mr. Durbiano is a Chartered Financial Analyst and received his M.B.A. in Finance from the University of Pittsburgh.

Christopher J. Smith

Christopher J. Smith has been the Fund’s Portfolio Manager since June 2000. Mr. Smith joined Federated in 1995 as a Portfolio Manager and a Vice President of a Federated advisory subsidiary. He has been a Vice President of the Fund’s Adviser since 1997. He was an Assistant Vice President of Provident Life & Accident Insurance Company from 1987 through 1994. Mr. Smith is a Chartered Financial Analyst. He received his M.A. in Economics and Finance from the University of Kentucky.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.75% 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.

Legal Proceedings

Like many other mutual fund companies, in September 2003, Federated Investors, Inc., the parent company of the Federated funds’ advisers and distributor (collectively, “Federated”), received detailed requests for information on shareholder trading activities in the Federated funds (“Funds”) from the SEC, the New York State Attorney General, and the National Association of Securities Dealers. Since that time, Federated has received additional inquiries from regulatory authorities on these and related matters, and more such inquiries may be received in the future.

As a result of these inquiries, Federated and the Funds have conducted an internal investigation of the matters raised, which revealed instances in which a few investors were granted exceptions to Federated’s internal procedures for limiting frequent transactions and that one of these investors made an additional investment in another Federated fund. The investigation has also identified inadequate procedures which permitted a limited number of investors (including several employees) to engage in undetected frequent trading activities and/or the placement and acceptance of orders to purchase shares of fluctuating net asset value funds after the funds’ closing times. Federated has issued a series of press releases describing these matters in greater detail and emphasizing that it is committed to compensating the Funds for any detrimental impact these transactions may have had on them. In that regard, on February 3, 2004, Federated and the independent directors of the Funds announced the establishment by Federated of a restoration fund that is intended to cover any such detrimental impact. The press releases and related communications are available in the “About Us” section of Federated’s website at www.federatedinvestors.com, and any future press releases on this subject will also be posted there.

Shortly after Federated’s first public announcement concerning the foregoing matters, and notwithstanding Federated’s commitment to taking remedial actions, Federated and various Funds were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders.

Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and rule 12b-1 fees, and seeking damages of unspecified amounts.

The board of the Funds has retained the law firm of Dickstein, Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund’s financial performance for its past five fiscal years. 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 any dividends and capital gains.

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

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Financial Highlights–Class A Shares

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(For a Share Outstanding Throughout Each Period)

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	Year Ended 11/30/2004
Net Asset Value, Beginning of Period	$9.04
Income From Investment Operations:
Net investment income	0.53
Net realized and unrealized gain (loss) on investments	0.08
TOTAL FROM INVESTMENT OPERATIONS	0.61
Less Distributions:
Distributions from net investment income	(0.56	)
Net Asset Value, End of Period	$9.09
Total Return3	6.89	%
Ratios to Average Net Assets:
Expenses	1.05	%
Net investment income	5.81	%
Expense waiver/reimbursement5	0.17	%
Supplemental Data:
Net assets, end of period (000 omitted)	$395,445
Portfolio turnover	25	%

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1 The Fund changed its fiscal year-end from October 31 to November 30.

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2 Effective December 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (“AICPA”) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002, was to decrease net investment income per share by $0.01, increase net realized and unrealized gain (loss) per share by $0.01 and decrease the ratio of net investment income to average net assets from 7.26% to 7.13%. Per share, ratios and supplemental data for periods to November 30, 2002 have not been restated to reflect this change in presentation.

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3 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

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4 Computed on an annualized basis.

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5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Year Ended November 30,							Period Ended 11/30/2000		Year Ended 10/31/2000
	2003		2002		2001			1
	$8.49		$8.72		$8.55		$8.65		$9.11
	0.58		0.62	2	0.66		0.06		0.69
	0.55		(0.25	)2	0.19		(0.10	)	(0.44	)
	1.13		0.37		0.85		(0.04	)	0.25
	(0.58	)	(0.60	)	(0.68	)	(0.06	)	(0.71	)
	$9.04		$8.49		$8.72		$8.55		$8.65
	13.62	%	4.43	%	10.24	%	(0.46	)%	2.81	%
	1.05	%	1.06	%	1.06	%	1.05	%4	1.05	%
	6.32	%	7.13	%2	7.51	%	8.38	%4	7.85	%
	0.16	%	0.16	%	0.17	%	0.21	%4	0.18	%
	$377,436		$319,597		$232,594		$217,008		$216,101
	28	%	27	%	31	%	2	%	27	%

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Financial Highlights–Class B Shares

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(For a Share Outstanding Throughout Each Period)

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	Year Ended 11/30/2004
Net Asset Value, Beginning of Period	$9.06
Income From Investment Operations:
Net investment income	0.46
Net realized and unrealized gain (loss) on investments	0.08
TOTAL FROM INVESTMENT OPERATIONS	0.54
Less Distributions:
Distributions from net investment income	(0.48	)
Net Asset Value, End of Period	$9.12
Total Return3	6.12	%
Ratios to Average Net Assets:
Expenses	1.85	%
Net investment income	5.04	%
Expense waiver/reimbursement5	0.12	%
Supplemental Data:
Net assets, end of period (000 omitted)	$417,278
Portfolio turnover	25	%

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1 The Fund changed its fiscal year-end from October 31 to November 30.

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2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002 was to decrease net investment income per share by $0.01, increase net realized and unrealized gain (loss) per share by $0.01, and decrease the ratio of net investment income to average net assets from 6.46% to 6.33%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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3 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

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4 Computed on an annualized basis.

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5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Year Ended November 30,						Period Ended 11/30/2000		Year Ended 10/31/2000
2003		2002		2001			1
$8.51		$8.74		$8.57		$8.66		$9.12
0.51		0.55	2	0.60		0.05		0.63
0.55		(0.25	)2	0.18		(0.09	)	(0.45	)
1.06		0.30		0.78		(0.04	)	0.18
(0.51	)	(0.53	)	(0.61	)	(0.05	)	(0.64	)
$9.06		$8.51		$8.74		$8.57		$8.66
12.69	%	3.60	%	9.35	%	(0.42	)%	2.02	%
1.85	%	1.86	%	1.86	%	1.85	%4	1.85	%
5.52	%	6.33	%2	6.70	%	7.56	%4	7.05	%
0.11	%	0.11	%	0.12	%	0.16	%4	0.13	%
$480,042		$426,299		$380,016		$286,738		$288,505
28	%	27	%	31	%	2	%	27	%

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Financial Highlights–Class C Shares

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(For a Share Outstanding Throughout Each Period)

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	Year Ended 11/30/2004
Net Asset Value, Beginning of Period	$9.07
Income From Investment Operations:
Net investment income	0.46
Net realized and unrealized gain (loss) on investments	0.07
TOTAL FROM INVESTMENT OPERATIONS	0.53
Less Distributions:
Distributions from net investment income	(0.48	)
Net Asset Value, End of Period	$9.12
Total Return3	6.00	%
Ratios to Average Net Assets:
Expenses	1.85	%
Net investment income	5.02	%
Expense waiver/reimbursement5	0.12	%
Supplemental Data:
Net assets, end of period (000 omitted)	$89,339
Portfolio turnover	25	%

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1 The Fund changed its fiscal year-end from October 31 to November 30.

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2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002 was to decrease net investment income per share by $0.01, increase net realized and unrealized gain (loss) per share by $0.01, and decrease the ratio of net investment income to average net assets from 6.46% to 6.33%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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3 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

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4 Computed on an annualized basis.

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5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Year Ended November 30,						Period Ended 11/30/2000		Year Ended 10/31/2000
2003		2002		2001			1
$8.52		$8.74		$8.57		$8.66		$9.12
0.51		0.54	2	0.60		0.05		0.63
0.55		(0.23	)2	0.18		(0.09	)	(0.45	)
1.06		0.31		0.78		(0.04	)	0.18
(0.51	)	(0.53	)	(0.61	)	(0.05	)	(0.64	)
$9.07		$8.52		$8.74		$8.57		$8.66
12.68	%	3.70	%	9.33	%	(0.42)	%	2.02	%
1.85	%	1.86	%	1.86	%	1.85	%4	1.85	%
5.52	%	6.33	%2	6.70	%	7.56	%4	7.04	%
0.11	%	0.11	%	0.12	%	0.16	%4	0.13	%
$91,905		$77,272		$82,973		$74,250		$75,821
28	%	27	%	31	%	2	%	27	%

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Financial Highlights–Class F Shares

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(For a Share Outstanding Throughout Each Period)

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	Year Ended 11/30/2004
Net Asset Value, Beginning of Period	$9.07
Income From Investment Operations:
Net investment income	0.53
Net realized and unrealized gain (loss) on investments	0.08
TOTAL FROM INVESTMENT OPERATIONS	0.61
Less Distributions:
Distributions from net investment income	(0.55	)
Net Asset Value, End of Period	$9.13
Total Return3	6.94	%
Ratios to Average Net Assets:
Expenses	1.08	%
Net investment income	5.80	%
Expense waiver/reimbursement5	0.14	%
Supplemental Data:
Net assets, end of period (000 omitted)	$211,844
Portfolio turnover	25	%

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1 The Fund changed its fiscal year-end from October 31 to November 30.

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2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002 was to decrease net investment income per share by $0.01, increase net realized and unrealized gain (loss) per share by $0.01, and decrease the ratio of net investment income to average net assets from 7.23% to 7.10%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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3 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

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4 Computed on an annualized basis.

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5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Year Ended November 30,						Period Ended 11/30/2000		Year Ended 10/31/2000
2003		2002		2001			1
$8.52		$8.75		$8.57		$8.67		$9.12
0.57		0.61	2	0.66		0.06		0.70
0.55		(0.24	)2	0.20		(0.10	)	(0.44	)
1.12		0.37		0.86		(0.04	)	0.26
(0.57	)	(0.60	)	(0.68)		(0.06	)	(0.71	)
$9.07		$8.52		$8.75		$8.57		$8.67
13.53	%	4.39	%	10.30	%	(0.46	)%	2.92	%
1.08	%	1.09	%	1.09	%	1.08	%4	1.08	%
6.28	%	7.10	%2	7.48	%	8.33	%4	7.82	%
0.13	%	0.13	%	0.14	%	0.18	%4	0.15	%
$246,014		$252,905		$301,788		$306,621		$313,811
28	%	27	%	31	%	2	%	27	%

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A Statement of Additional Information (SAI) dated January 31, 2005, is incorporated by reference into this prospectus. Additional information about the Fund and its investments is contained in the Fund’s SAI and Annual and Semi-Annual Reports to shareholders as they become available. The Annual Report’s Management’s Discussion of Fund Performance discusses market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your investment professional or the Fund at 1-800-341-7400.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at www.federatedinvestors.com.

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You can obtain information about the Fund (including the SAI) by writing to or visiting the SEC’s Public Reference Room in Washington, DC. You may also access Fund information from the EDGAR Database on the SEC’s website at www.sec.gov. You can purchase copies of this information by contacting the SEC by email at publicinfo@sec.gov or by writing to the SEC’s Public Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public Reference Room’s operations and copying fees.

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Federated Investors
World-Class Investment Manager

Federated Bond Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com

Contact us at 1-800-341-7400 or
www.federatedinvestors.com/contact

Federated Securities Corp., Distributor

Investment Company Act File No. 811-07021

Federated is a registered mark of Federated Investors, Inc.
2005 ©Federated Investors, Inc.

Cusip 31420F103
Cusip 31420F202
Cusip 31420F301
Cusip 31420F400

<R>

28141 (1/05)

</R>

FEDERATED BOND FUND

A Portfolio of Federated Investment Series Funds, Inc.

Statement of additional Information
<R>January 31, 2005</R>

Class A Shares
Class B Shares
Class C Shares
Class F Shares

<R>This Statement of Additional Information (SAI) is not a prospectus. Read this SAI in
conjunction with the prospectus for Federated Bond Fund (Fund), dated January 31, 2005.
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.

2041304B (1/05) </R>

Contents

How is the Fund Organized?................ 1
Securities in Which the Fund Invests...... 1
What Do Shares Cost?..................... 11
How is the Fund Sold?.................... 12
Exchanging Securities for Shares......... 13
Subaccounting Services................... 13
Redemption in Kind....................... 13
Account and Share Information............ 14
Tax Information.......................... 14
Who Manages and Provides Services to the Fund?   15
How Does the Fund Measure Performance?... 21
Who is Federated Investors, Inc.?........ 24
Financial Information.................... 25
Investment Ratings....................... 25
Addresses................................ 26
<R>Appendix..............................................................................</R>
HOW IS THE FUND ORGANIZED?


The Fund is a diversified portfolio of Federated Investment Series Funds, Inc.
(Corporation). The Corporation is an open-end, management investment company that was
established under the laws of the State of Maryland on May 19, 1992. The Corporation may
offer separate series of shares representing interests in separate portfolios of securities.
  The Board of Directors (the "Board") has established four classes of shares of the Fund,
known as Class A Shares, Class B Shares, Class C Shares and Class F Shares (Shares). This
SAI relates to all classes of Shares. The Fund's investment adviser is Federated Investment
Management Company (Adviser).

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:

SECURITIES DESCRIPTIONS AND TECHNIQUES

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.

AGENCY SECURITIES
<R>Agency securities are issued or guaranteed by a federal agency or other government
sponsored entity (GSE) acting under federal authority. Some GSE securities are supported by
the full faith and credit of the United States. These include the Government National
Mortgage Association, Small Business Administration, Farm Credit System Financial
Assistance Corporation, Farmer's Home Administration, Federal Financing Bank, General
Services Administration, Department of Housing and Urban Development, Export-Import Bank,
Overseas Private Investment Corporation, and Washington Metropolitan Area Transit Authority
Bonds.

Other GSE securities receive support through federal subsidies, loans or other benefits.
For example, the U.S. Treasury is authorized to purchase specified amounts of securities
issued by (or otherwise make funds available to) the Federal Home Loan Bank System, Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association, Student Loan
Marketing Association, and Tennessee Valley Authority in support of such obligations.

A few GSE securities have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. These include the Farm
Credit System, Financing Corporation, and Resolution Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as Treasury
securities.
A Fund treats mortgage-backed securities guaranteed by a GSE as if issued or guaranteed by
a federal agency.

Although such a guarantee protects against credit risks, it does not reduce market and
prepayment risks. </R>

CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses. Notes, bonds,
debentures and commercial paper are the most prevalent types of corporate debt securities.
The Fund may also purchase interests in bank loans to companies. The credit risks of
corporate debt securities vary widely among issuers.
  In addition, the credit risk of an issuer's debt security may vary based on its priority
for repayment. For example, higher ranking (senior) debt securities have a higher priority
than lower ranking (subordinated) securities. This means that the issuer might not make
payments on subordinated securities while continuing to make payments on senior securities.
In addition, in the event of bankruptcy, holders of senior securities may receive amounts
otherwise payable to the holders of subordinated securities. Some subordinated securities,
such as trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue securities
known as surplus notes that permit the insurance company to defer any payment that would
reduce its capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine months.
Companies typically issue commercial paper to pay for current expenditures. Most issuers
constantly reissue their commercial paper and use the proceeds (or bank loans) to repay
maturing paper. If the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default. The short maturity of commercial paper reduces both the
market and credit risks as compared to other debt securities of the same issuer.

Demand Instruments
Demand instruments are corporate debt securities that the issuer must repay upon demand.
Other demand instruments require a third party, such as a dealer or bank, to repurchase the
security for its face value upon demand. The Fund treats demand instruments as short-term
securities, even though their stated maturity may extend beyond one year.

MUNICIPAL SECURITIES
Municipal securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from federal
income tax, the Fund may invest in taxable municipal securities. As a matter of operating
policy, the lowest rated municipal debt obligations in which the Fund will invest will be
rated BBB or better by an NRSRO, or which are of comparable quality in the judgment of the
Fund's Adviser.

Mortgage Backed Securities
The Fund may invest in mortgage backed securities primarily by investing in another
investment company (which is not available for general investment by the public) that owns
those securities and that is advised by an affiliate of the Adviser. This other investment
company is managed independently of the Fund and may incur additional administrative
expenses. Therefore, any such investment by the Fund may be subject to duplicate expenses.
However, the Adviser believes that the benefits and efficiencies of this approach should
outweigh the potential additional expenses. The Fund may also invest in such securities
directly.
  Mortgage backed securities represent interests in pools of mortgages. The mortgages that
comprise a pool normally have similar interest rates, maturities and other terms. Mortgages
may have fixed or adjustable interest rates. Interests in pools of adjustable rate
mortgages are known as ARMs.
  Mortgage backed securities come in a variety of forms. Many have extremely complicated
terms. The simplest form of mortgage backed securities are pass-through certificates. An
issuer of pass-through certificates gathers monthly payments from an underlying pool of
mortgages. Then, the issuer deducts its fees and expenses and passes the balance of the
payments onto the certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and prepayments from the underlying mortgages. As
a result, the holders assume all the prepayment risks of the underlying mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)
CMOs, including interests in real estate mortgage investment conduits (REMICs), allocate
payments and prepayments from an underlying pass-through certificate among holders of
different classes of mortgage backed securities. This creates different prepayment and
interest rate risks for each CMO class. All CMOs purchased by the Fund are investment
grade, as rated by an NRSRO.
SEQUENTIAL CMOS
In a sequential pay CMO, one class of CMOs receives all principal payments and prepayments.
The next class of CMOs receives all principal payments after the first class is paid off.
This process repeats for each sequential class of CMO. As a result, each class of
sequential pay CMOs reduces the prepayment risks of subsequent classes.

PACS, TACS AND COMPANION CLASSES
More sophisticated CMOs include planned amortization classes (PACs) and targeted
amortization classes (TACs). PACs and TACs are issued with companion classes. PACs and TACs
receive principal payments and prepayments at a specified rate. The companion classes
receive principal payments and prepayments in excess of the specified rate. In addition,
PACs will receive the companion classes' share of principal payments, if necessary, to
cover a shortfall in the prepayment rate. This helps PACs and TACs to control prepayment
risks by increasing the risks to their companion classes.
IOS AND POS
CMOs may allocate interest payments to one class (Interest Only or IOs) and principal
payments to another class (Principal Only or POs). POs increase in value when prepayment
rates increase. In contrast, IOs decrease in value when prepayments increase, because the
underlying mortgages generate less interest payments. However, IOs tend to increase in
value when interest rates rise (and prepayments decrease), making IOs a useful hedge
against interest rate risks.
FLOATERS AND INVERSE FLOATERS
Another variant allocates interest payments between two classes of CMOs. One class
(Floaters) receives a share of interest payments based upon a market index such as LIBOR.
The other class (Inverse Floaters) receives any remaining interest payments from the
underlying mortgages. Floater classes receive more interest (and Inverse Floater classes
receive correspondingly less interest) as interest rates rise. This shifts prepayment and
interest rate risks from the Floater to the Inverse Floater class, reducing the price
volatility of the Floater class and increasing the price volatility of the Inverse Floater
class.

Z CLASSES AND RESIDUAL CLASSES
CMOs must allocate all payments received from the underlying mortgages to some class. To
capture any unallocated payments, CMOs generally have an accrual (Z) class. Z classes do
not receive any payments from the underlying mortgages until all other CMO classes have
been paid off. Once this happens, holders of Z class CMOs receive all payments and
prepayments. Similarly, REMICs have residual interests that receive any mortgage payments
not allocated to another REMIC class.
  The degree of increased or decreased prepayment risks depends upon the structure of the
CMOs. However, the actual returns on any type of mortgage backed security depend upon the
performance of the underlying pool of mortgages, which no one can predict and will vary
among pools.

Asset Backed Securities
Asset backed securities are payable from pools of obligations other than mortgages. Most
asset backed securities involve consumer or commercial debts with maturities of less than
ten years. However, almost any type of fixed income assets (including other fixed income
securities) may be used to create an asset backed security. Asset backed securities may
take the form of commercial paper, notes, or pass through certificates. Asset backed
securities have prepayment risks. Like CMOs, asset backed securities may be structured like
Floaters, Inverse Floaters, IOs and POs.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks. Bank instruments
include bank accounts, time deposits, certificates of deposit and banker's acceptances.
Yankee instruments are denominated in U.S. dollars and issued by U.S. branches of foreign
banks. Eurodollar instruments are denominated in U.S. dollars and issued by
non-U.S. branches of U.S. or foreign banks. The total acceptances of any bank held by the
Fund cannot exceed 0.25% of such bank's total deposits according to the bank's last
published statement of condition preceding the date of acceptance.
<R>Insurance Contracts
Insurance contracts include guaranteed investment contracts, funding agreements and
annuities.  The Fund treats these contracts as fixed income securities. </R>

ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity unlike debt
securities that provide periodic payments of interest (referred to as a coupon payment).
Investors buy zero coupon securities at a price below the amount payable at maturity. The
difference between the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to receive interest and
principal, which increases the interest rate and credit risks of a zero coupon security.
  There are many forms of zero coupon securities. Some are issued at a discount and are
referred to as zero coupon or capital appreciation bonds. Others are created from interest
bearing bonds by separating the right to receive the bond's coupon payments from the right
to receive the bond's principal due at maturity, a process known as coupon stripping.
Treasury STRIPs, IOs and POs are the most common forms of stripped zero coupon securities.
In addition, some securities give the issuer the option to deliver additional securities in
place of cash interest payments, thereby increasing the amount payable at maturity. These
are referred to as pay-in-kind or PIK securities.

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. Generally, less than 10% of the value of the Fund's total assets
will be invested in equity securities. The Adviser may choose to exceed this 10% limitation
if unusual market conditions suggest such investments represent a better opportunity to
reach the Fund's investment objective. The following describes the 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. The Fund will treat such redeemable preferred stock as a fixed
income security.
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.
REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are real estate investment trusts that lease, operate and finance commercial real
estate. REITs are exempt from federal corporate income tax if they limit their operations
and distribute most of their income. Such tax requirements limit a REIT's ability to
respond to changes in the commercial real estate market.

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.

Convertible Securities
Convertible securities are fixed income securities that the Fund has the option to exchange
for equity securities at a specified conversion price. The option allows the Fund to
realize additional returns if the market price of the equity securities exceeds the
conversion price. For example, the Fund may hold fixed income securities that are
convertible into shares of common stock at a conversion price of $10 per share. If the
market value of the shares of common stock reached $12, the Fund could realize an
additional $2 per share by converting its fixed income 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.
  The Fund treats convertible securities as both fixed income and equity securities for
purposes of its investment policies and limitations, because of their unique
characteristics.
  The Fund does not limit convertible securities by rating, and there is no minimal
acceptance rating for a convertible security to be purchased or held in the Fund.
Therefore, the Fund invests in convertible securities irrespective of their ratings. This
could result in the Fund purchasing and holding, without limit, convertible securities
rated below investment grade by an NRSRO.

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
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 another
country.
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.
  The Fund reserves the right to invest up to 25% of its total assets in fixed income
securities of foreign governmental units located within an individual foreign nation.

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 interest rate and currency risks, and may also
expose the Fund to liquidity and leverage risks. OTC contracts also expose the Fund to
credit risks in the event that a counterparty defaults on the contract.
  The Fund may trade in the following types of derivative contracts:

<R>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. The Fund has claimed an
exclusion from the definition of the term "commodity pool operator" under the Commodity
Exchange Act and, therefore, is not subject to registration or regulation as a commodity
pool operator under that Act. Futures contracts traded OTC are frequently referred to as
forward contracts. The Fund can buy or sell financial futures, index futures, currency
futures and foreign currency forward contracts. </R>

Options
Options are rights to buy or sell an underlying asset or instrument for a specified price
(the exercise price) during, or at the end of, a specified period. The seller (or writer)
of the option receives a payment, or premium, from the buyer, which the writer keeps
regardless of whether the buyer uses (or exercises) the option. Options can trade on
exchanges or in the OTC market and may be bought or sold on a wide variety of underlying
assets or instruments, including financial indices, individual securities, and other
derivative instruments, such as futures contracts. Options that are written on futures
contracts will be subject to margin requirements similar to those applied to futures
contracts.

Call Options
A call option gives the holder (buyer) the right to buy the underlying asset from the
seller (writer) of the option. The Fund may use call options in the following ways:
o     Buy call options on indices, individual securities, index futures, currencies (both
      foreign and U.S. dollar) and financial futures in anticipation of an increase in the
      value of the underlying asset or instrument; and
o     Write call options on indices, portfolio securities, index futures, currencies (both
      foreign and U.S. dollar) and financial futures to generate income from premiums, and
      in anticipation of a decrease or only limited increase in the value of the underlying
      asset. 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.
   Put Options
o     A put option gives the holder the right to sell the underlying asset to the writer of
      the option. The Fund may use put options in the following ways:
o     Buy put options on indices, individual securities, index futures, currencies (both
      foreign and U.S. dollar) and financial futures in anticipation of a decrease in the
      value of the underlying asset; and
o     Write put options on indices, portfolio securities, index futures, currencies (both
      foreign and U.S. dollar) and financial futures to generate income from premiums, and
      in anticipation of an increase or only limited decrease in the value of the
      underlying asset. 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.
The Fund may also buy or write options, as needed, to close out existing option positions.

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.

Total Rate of Return Swaps
Total rate of return swaps are contracts in which one party agrees to make payments of the
total return from the underlying asset during the specified period, in return for payments
equal to a fixed or floating rate of interest or the total return from another underlying
asset.
Credit Default Swaps
<R>A credit default swap is an agreement between two parties (the "Counterparties") whereby
one party (the "Protection Buyer") agrees to make payments over the term of the CDS to
another party (the "Protection Seller"), provided that no designated event of default (an
"Event of Default") occurs on an underlying bond (the "Reference Bond") has occurred. If an
Event of Default occurs, the Protection Seller must pay the Protection Buyer the full
notional value, or "par value," of the Reference Bond in exchange for the Reference Bond or
another similar bond issued by the issuer of the Reference Bond (the "Deliverable Bond").
The Counterparties agree to the characteristics of the Deliverable Bond at the time that
they enter into the CDS. The Fund may be either the Protection Buyer or the Protection
Seller in a CDS. Under normal circumstances, the Fund will enter into a CDS for hedging
purposes (as Protection Buyer) or to generate additional income (as Protection Seller). If
the Fund is a Protection Buyer and no Event of Default occurs, the Fund will lose its
entire investment in the CDS (i.e., an amount equal to the payments made to the Protection
Seller). However, if an Event of Default occurs, the Fund (as Protection Buyer) will
deliver the Deliverable Bond and receive a payment equal to the full notional value of the
Reference Bond, even though the Reference Bond may have little or no value. If the Fund is
the Protection Seller and no Event of Default occurs, the Fund will receive a fixed rate of
income throughout the term of the CDS. However, if an Event of Default occurs, the Fund (as
Protection Seller) will pay the Protection Buyer the full notional value of the Reference
Bond and receive the Deliverable Bond from the Protection Buyer. A CDS may involve greater
risks than if the Fund invested directly in the Reference Bond. For example, a CDS may
increase credit risk since the Fund has exposure to both the issuer of the Reference Bond
and the Counterparty to the CDS. </R>

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.

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 interest rate 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 interest rate risks and credit risks.

<R>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 interest rate risks
than traditional instruments.  Moreover, depending on the structure of the particular
hybrid, it may expose the Fund to leverage risks or carry liquidity risks.

Credit Linked Notes
A credit linked note ("CLN") is a type of hybrid instrument in which a special purpose
entity issues a structured note (the "Note Issuer") that is intended to replicate a bond or
a portfolio of bonds. The purchaser of the CLN (the "Note Purchaser") invests a par amount
and receives a payment during the term of the CLN that equals a fixed or floating rate of
interest equivalent to a high rated funded asset (such as a bank certificate of deposit)
plus an additional premium that relates to taking on the credit risk of an identified bond
(the "Reference Bond"). Upon maturity of the CLN, the Note Purchaser will receive a payment
equal to (i) the original par amount paid to the Note Issuer, if there is neither a
designated event of default (an "Event of Default") with respect to the Reference Bond nor
a restructuring of the issuer of the Reference Bond (a "Restructuring Event") or (ii) the
value of the Reference Bond or some other settlement amount agreed to in advance by the
Note Issuer and the Note Purchaser, if an Event of Default or a Restructuring Event has
occurred. Depending upon the terms of the CLN, it is also possible that the Note Purchaser
may be required to take physical delivery of the Reference Bond in the event of an Event of
Default or a Restructuring Event.  Typically, the Reference Bond is a corporate bond,
however, any type of fixed income security could be used as the Reference Bond. </R>


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 in accordance with the Adviser's segregation policies. Unless the
Fund has other readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without 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.

Inter-Fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that permits the Fund
and all other funds advised by subsidiaries of Federated Investors, Inc. (Federated funds)
to lend and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary for both
borrowing and lending funds, and an inter-fund loan is only made if it benefits each
participating Federated fund. Federated Investors, Inc. (Federated) administers the program
according to procedures approved by the Fund's Board, and the Board monitors the operation
of the program. Any inter-fund loan must comply with certain conditions set out in the
exemption, which are designed to assure fairness and protect all participating Federated
funds.
  For example, inter-fund lending is permitted only: (a) to meet shareholder redemption
requests; and (b) to meet commitments arising from "failed" trades. All inter-fund loans
must be repaid in seven days or less. The Fund's participation in this program must be
consistent with its investment policies and limitations, and must meet certain percentage
tests. Inter-fund loans may be made only when the rate of interest to be charged is more
attractive to the lending Federated fund than market-competitive rates on overnight
repurchase agreements (Repo Rate) and more attractive to the borrowing Federated fund than
the rate of interest that would be charged by an unaffiliated bank for short-term
borrowings (Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.

Investing in Securities of Other Investment Companies
<R>The Fund may invest its assets in securities of other investment companies, including
the securities of affiliated money market funds, as an efficient means of carrying out its
investment policies and managing its uninvested cash. The Fund may invest in mortgage
backed and high yield securities primarily by investing in another investment company
(which is not available for general investment by the public) that owns those securities
and that is advised by an affiliate of the Adviser. The Fund may also invest in such
securities directly. These other investment companies are managed independently of the Fund
and incur additional administrative expenses. Therefore, any such investment by the Fund
may be subject to duplicate expenses. However, the Adviser believes that the benefits and
efficiencies of this approach should outweigh the additional expenses. </R>

Investment Ratings
Investment grade securities include fixed income securities rated AAA, the highest rating
category, through BBB by a Nationally Recognized Rating Service (Rating Service) or, if
unrated, those securities determined to be of equivalent quality by the Adviser.
Non-investment grade fixed income securities are rated BB or below by a Rating Service or
unrated. When the Fund invests in fixed income securities some will be non-investment grade
at the time of purchase. Unrated securities will be determined by the Adviser to be of like
quality and may have greater risk but a higher yield than comparable rated securities.
  Securities rated BBB or below by Standard and Poor's or Baa by Moody's Investor Service
have speculative characteristics.

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

Fixed Income Securities Investment Risks

Interest Rate Risks
o     Prices of fixed income securities rise and fall in response to changes in the
      interest rate paid by similar securities. Generally, when interest rates rise, prices
      of fixed income securities fall. However, market factors, such as the demand for
      particular fixed income securities, may cause the price of certain fixed income
      securities to fall while the prices of other securities rise or remain unchanged.
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 Service. These services assign ratings to securities by
      assessing the likelihood of issuer default. Lower credit ratings correspond to higher
      perceived credit risk and higher credit ratings correspond to lower perceived credit
      risk. Credit ratings do not provide assurance against default or other loss of money.
      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.

Call Risks
o     Call risk is the possibility that an issuer may redeem a fixed income security before
      maturity (a call) at a price below its current market price. An increase in the
      likelihood of a call may reduce the security's price.
o     If a fixed income security is called, the Fund may have to reinvest the proceeds in
      other fixed income securities with lower interest rates, higher credit risks, or
      other less favorable characteristics.

Liquidity Risks
o     Trading opportunities are more limited for fixed income securities that have not
      received any credit ratings, have received ratings below investment grade or are not
      widely held.
o     Trading opportunities are more limited for CMOs that have complex terms or that are
      not widely held. These features 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.

<R>Currency Risks
o     Exchange rates for currencies fluctuate daily. The combination of currency risk and
      market risks tends to make securities traded in foreign markets more volatile than
      securities traded exclusively in the U.S.


Leverage Risks
o     Leverage risk is created when an investment exposes the Fund to a level of risk that
      exceeds the amount invested. Changes in the value of such an investment magnify the
      Fund's risk of loss and potential for gain.

o     Investments can have these same results if their returns are based on a multiple of a
      specified index, security, or other benchmark. </R>


Risks Associated with Non-Investment 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.

Risks of Foreign Investing
o     Foreign securities pose additional risks because foreign economic or political
      conditions may be less favorable than those of the United States. 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 U.S. 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.

<R>Risks of Investing in Derivative Contracts and Hybrid Instruments
The Fund's use of derivative contracts involves risks different from, or possibly greater
than, the risks associated with investing directly in securities and other traditional
investments.  First, changes in the value of the derivative contracts and hybrid
instruments in which the Fund invests may not be correlated with changes in the value of
the underlying asset or if they are correlated, may move in the opposite direction than
originally anticipated. Second, while some strategies involving derivatives may reduce the
risk of loss, they may also reduce potential gains or, in some cases, result in losses by
offsetting favorable price movements in portfolio holdings.  Third, there is a risk that
derivatives contracts and hybrid instruments may be mispriced or improperly valued and, as
a result, the Fund may need to make increased cash payments to the counterparty. Fourth,
the Fund may enter into combinations of derivative contracts in an attempt to benefit from
changes in the prices of those derivative contracts (without regard to changes in the value
of the security, index or currency underlying the derivative).  Finally, derivative
contracts and hybrid instruments may cause the Fund to realize increased ordinary income or
short-term capital gains (which are treated as ordinary income for Federal income tax
purposes) and, as a result, may increase taxable distributions to shareholders.  Derivative
contracts and hybrid instruments may also involve other risks described in this prospectus,
such as interest rate, credit, liquidity and leverage risks. </R>


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

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.

Risks of Foreign Investing
o     Foreign securities pose additional risks because foreign economic or political
      conditions may be less favorable than those of the United States. 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 U.S. 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.

Leverage Risks
o     Leverage risk is created when an investment exposes the Fund to a level of risk that
      exceeds the amount invested. Changes in the value of such an investment magnify the
      Fund's risk of loss and potential for gain.
o     Investments can have these same results if their returns are based on a multiple of a
      specified index, security, or other benchmark.

<R>Risks of Investing in Derivatives Contracts and Hybrid Instruments
The Fund's use of derivative contracts and hybrid instruments involves risks different
from, or possibly greater than, the risks associated with investing directly in securities
and other traditional investments. First, there is a possibility that the correlation
between the price movements of a derivative and the underlying reference asset or index
will be imperfectly correlated or not correlated at all. This is often referred to as basis
risk. Second, even if price movements of the derivative contract and the reference asset
are correlated, the Fund can incur losses if the value of the reference asset moves in the
opposite direction than originally anticipated. Third, while some strategies involving
derivatives may reduce the risk of loss, they may also reduce potential gains or, in some
cases, result in losses by offsetting favorable price movements in portfolio holdings.
Fourth, the Fund's use of derivatives may cause the Fund to realize a higher amount of
short-term capital gains, which are usually taxed at ordinary income tax rates for Federal
income tax purposes. This may, in turn, increase the taxes payable by Fund shareholders.
Finally, there is a risk that derivatives could be mispriced or improperly valued and, as a
result, increased cash payments could need to be made to a derivative counterparty.
Derivatives are also subject to a number of other risks described herein, such as interest
rate, credit, liquidity and leverage risks.
  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 interest rate risks
than traditional instruments. Moreover, depending on the structure of the particular
hybrid, it may expose the Fund to leverage risks or carry liquidity risks. </R>

Fundamental INVESTMENT Objective
The Fund's investment objective is to provide as high a level of current income as is
consistent with the preservation of capital. The investment objective may not be changed by
the Fund's Directors without shareholder approval.

INVESTMENT LIMITATIONS

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

Issuing Senior Securities And Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities to the
maximum extent permitted under the Investment Act of 1940 (1940 Act).

Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction does not
prevent the Fund from investing in issuers which invest, deal, or otherwise engage in
transactions in real estate or interests therein, or investing in securities that are
secured by real estate or interests therein. The Fund may exercise its rights under
agreements relating to such securities, including the right to enforce security interests
and to hold real estate acquired by reason of such enforcement until that real estate can
be liquidated in an orderly manner.

Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund may purchase
securities of companies that deal in commodities.

Underwriting
The Fund may not underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its portfolio
securities, under circumstances where it may be considered to be an underwriter under the
Securities Act of 1933.

Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the Fund from
purchasing debt obligations, entering into repurchase agreements, lending its assets to
broker/dealers or institutional investors and investing in loans, including assignments and
participation interests.

Concentration of Investments
The Fund will not make investments that will result in the concentration of its investments
in the securities of issuers primarily engaged in the same industry. Government securities,
municipal securities and bank instruments will not be deemed to constitute an industry.
  The above limitations cannot be changed unless authorized by the Board and by the "vote
of a majority of its outstanding voting securities," as defined by the 1940 Act. The
following limitations, however, may be changed by the Board without shareholder approval.
Shareholders will be notified before any material change in these limitations becomes
effective.

Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of securities and
further provided that the Fund may make margin deposits in connection with its use of
financial options and futures, forward and spot currency contracts, swap transactions, and
other financial contracts or derivative instruments.

Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided that this
shall not apply to the transfer of securities in connection with any permissible borrowing
or to collateral arrangements in connection with permissible activities.

Illiquid Securities
The Fund will not invest more than 15% of its net assets in securities which are illiquid,
including repurchase agreements providing for settlement in more than seven days after
notice.

Investing in Restricted Securities
The Fund may invest in restricted securities. Restricted securities are any securities in
which the Fund may invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. Under criteria established
by the Board certain restricted securities are determined to be liquid. To the extent that
restricted securities are not determined to be liquid, the Fund will limit their purchase,
together with other illiquid securities, to 15% of its net assets.

Investing in Securities of Other Investment Companies
<R>The Fund may invest its assets in securities of other investment companies, including
the securities of affiliated money market funds, as an efficient means of carrying out its
investment policies and managing its uninvested cash. The Fund may also invest in mortgage
backed and high yield securities primarily by investing in another investment company
(which is not available for general investment by the public) that owns those securities
and that is advised by an affiliate of the Adviser. The Fund may also invest in such
securities directly. These other investment companies are managed independently of the Fund
and may incur additional administrative expenses. Therefore, any such investment by the
Fund may be subject to duplicate expenses. However, the Adviser believes that the benefits
and efficiencies of this approach should outweigh the additional expenses.
In applying the concentration restriction: (a) utility companies will be divided according
to their services (for example, gas, gas transmission, electric and telephone will be
considered a separate industry); (b) financial service companies will be classified
according to the end users of their services (for example, automobile finance, bank finance
and diversified finance will each be considered a separate industry); and (c) asset-backed
securities will be classified according to the underlying assets securing such securities.
To conform to the current view of the SEC staff that only domestic bank instruments may be
excluded from industry concentration limitations, as a matter of non-fundamental policy,
the Fund will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition, investments in bank
instruments, and investments in certain industrial development bonds funded by activities
in a single industry, will be deemed to constitute investment in an industry, except when
held for temporary defensive purposes. The investment of more than 25% of the value of the
Fund's total assets in any one industry will constitute "concentration." </R>
  As a matter of non-fundamental policy, for purposes of the commodities policy,
investments in transactions involving futures contracts and options, forward currency
contracts, swap transactions and other financial contracts that settle by payment of cash
are not deemed to be investments in commodities.
  For purposes of the above 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" and "bank instruments." Except with respect to borrowing
money, if a percentage limitations 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 limitation.

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     futures contracts and options are generally valued at 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 generally 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;

o     <R>for mortgage-backed securities, based on aggregate investment value of the
  projected cash flows to be generated by the security, as furnished by an independent
  pricing service;

o     for other fixed income securities, according to the mean between bid and asked prices
  as furnished by an independent pricing service, except that fixed income securities with
  remaining maturities of less than 60 days at the time of purchase may be valued at
  amortized cost; and

o     for all other securities at fair value as determined in accordance with procedures
  established by and under the general supervision of the Board. </R>

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.


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?


<R>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. </R>

HOW IS THE FUND SOLD?


Under the Distributor's Contract with the Fund, the Distributor (Federated Securities
Corp.) 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
pays a portion of this charge to investment professionals that are eligible to receive it
(the "Dealer Reallowance") and retains any remaining portion of the front-end sales charge.
  When an investment professional's customer purchases Shares, the investment professional
may receive a Dealer Reallowance as follows:

Class A Shares
Purchase Amount                  Dealer
                                 Reallowance
                                 as a
                                 Percentage
                                 of Public
                                 Offering
                                 Price
Less than $100,000               4.00%
$100,000 but less than $250,000  3.25%
$250,000 but less than $500,000  2.25%
$500,000 but less than           1.80%
$1million
$1million or greater             0.00%

Class C Shares
                                 Dealer
                                 Reallowance
                                 as a
                                 Percentage
                                 of Public
                                 Offering
                                 Price
All Purchase Amounts             1.00%



ADVANCE COMMISSIONS
When an investment professional's customer purchases Shares, the investment professional
may receive an advance commission as follows:

Class A Shares (for purchases over $1 million)
Purchase Amount                 Advance
                                Commission
                                as a
                                Percentage
                                of Public
                                Offering
                                Price
First $1million - $5million     0.75%
Next $5million - $20million     0.50%
Over $20million                 0.25%


Advance commissions are calculated on a year by year basis based on amounts invested during
that year. Accordingly, with respect to additional purchase amounts, the advance commission
breakpoint 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 commission will be paid only on those
purchases that were not previously subject to a front-end sales charge or dealer advance
commission. Certain retirement accounts may not be eligible for this program.
Class B Shares:
                                Advance
                                Commission
                                as a
                                Percentage
                                of Public
                                Offering
                                Price
All Purchase Amounts            Up to 5.50%

Class C Shares:
                                Advance
                                Commission
                                as a
                                Percentage
                                of Public
                                Offering
                                Price
All Purchase Amounts            1.00%

Class F Shares:
Purchase Amount                 Advance
                                Commission
                                as a
                                Percentage
                                of Public
                                Offering
                                Price
Less than $2million             1.00%
$2million but less than         0.50%
$5million
$5million or greater            0.25%


RULE 12B-1 PLAN (Class A, B and C Shares)
<R>As a compensation type plan, the Rule 12b-1 Plan is designed to pay the Distributor for
activities principally intended to result in the sale of Shares such as advertising and
marketing of Shares (including printing and distributing prospectuses and sales literature
to prospective shareholders and financial institutions) and providing incentives to
investment professionals to sell Shares. The Plan is also designed to cover the cost of
administrative services performed in conjunction with the sale of Shares, including, but
not limited to, shareholder services, record keeping services and educational services, as
well as the costs of implementing and operating the Plan. The Rule 12b-1 Plan allows the
Distributor to contract with investment professionals to perform activities covered by the
Plan. The Rule 12b-1 Plan is expected to benefit the Fund in a number of ways. For example,
it is anticipated that the Plan will help the Fund attract and retain assets, thus
providing cash for orderly portfolio management and Share redemptions and possibly helping
to stabilize or reduce other operating expenses. </R>
  In addition, the Plan is integral to the multiple class structure of the Fund, which
promotes the sale of Shares by providing a range of options to investors. 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 provided the funds to
make advance commission payments to investment professionals.

<R> Additional Payments to Financial Institutions
The Distributor may pay out of its own resources amounts (including items of material
value) to certain financial institutions.  In some cases, such payments may be made by, or
funded from the resources of, companies affiliated with the Distributor (including the
Adviser).  While NASD regulations limit the sales charges that you may bear, there are no
limits with regard to the amounts that the Distributor may pay out of its own resources.
In addition to the payments which are generally described herein and in the prospectus, the
financial institution also may receive payments under the Rule 12b-1 Plan and/or Service
Fees.

You can ask your financial institution for information about any payments it receives from
the Distributor or the Federated funds and any services provided.

The following examples illustrate the types of instances in which the Distributor may make
additional payments to financial institutions.

Supplemental Payments
The Distributor may make supplemental payments to certain financial institutions that are
holders or dealers of record for accounts in one or more of the Federated funds.  These
payments may be based on such factors as the number or value of Shares the financial
institution sells or may sell; the value of client assets invested; or the type and nature
of services or support furnished by the financial institution.

Processing Support Payments
The Distributor may make payments to financial institutions that sell Federated fund shares
to help offset their costs associated with client account maintenance support, statement
processing and transaction processing.  The types of payments that the Distributor may make
under this category include payment of ticket charges on a per transaction basis; payment
of networking fees; and payment for ancillary services such as setting up funds on the
financial institution's mutual fund trading system.

Retirement Plan Program Servicing Payments
The Distributor may make payments to certain financial institutions who sell Federated fund
shares through retirement plan programs.  A financial institution may perform retirement
plan program services itself or may arrange with a third party to perform retirement plan
program services.  In addition to participant recordkeeping, reporting, or transaction
processing, retirement plan program services may include services rendered to a plan in
connection with fund/investment selection and monitoring; employee enrollment and
education; plan balance rollover or separation, or other similar services.

Other Benefits to Financial Institutions
From time to time, the Distributor, at its expense, may provide additional compensation to
financial institutions that sell or arrange for the sale of Shares.  Such compensation may
include financial assistance to financial institutions that enable the Distributor to
participate in or present at conferences or seminars, sales or training programs for
invited employees, client and investor events and other financial institution-sponsored
events.

The Distributor also may hold or sponsor, at its expense, sales events, conferences and
programs for employees or associated persons of financial institutions and may pay the
travel and lodging expenses of attendees.  The Distributor also may provide, at its
expense, meals and entertainment in conjunction with meetings with financial institutions.
Other compensation may be offered to the extent not prohibited by applicable laws,
regulations or the rules of any self-regulatory agency, such as the NASD. </R>

<R>UNDERWRITING COMMISSIONS
The following chart reflects the total front-end sales charges and contingent deferred
sales charges paid in connection with the sale of Class A Shares, Class B Shares, Class C
Shares and Class F Shares of the Fund and the amount retained by the Distributor for the
last three fiscal years ended November 30:

                    2004                      2003                     2002
           Total                       Total                     Total     Amount
           Sales         Amount        Sales       Amount        Sales      Retained
            Charges     Retained      Charges     Retained      Charges
Class A    $866,208     $107,201    $1,908,006    $249,038    $1,429,762    $230,598
Shares
Class B     753,889        0         1,671,342        0       12,815,148   5,602,786
Shares
Class C     146,054      5,451        164,144      13,194       223,313     111,369
Shares
Class F     57,481       6,922        74,981       28,786       123,241      42,401
Shares
</R>

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 1940 Act, 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.
  <R>As of January 4, 2005, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Class A Shares: Edward Jones & Co., Maryland Heights, MO
owned approximately 8,770,560 Shares (19.95%), Federated Investors, CPF Managed Portfolio
IV, Pittsburgh, PA  owned approximately 4,409,819 Shares (10.03%) and Federated Investors,
CPF Managed Portfolio III, Pittsburgh, PA  owned approximately 4,262,477 Shares (9.70%).
   As of January 4 2005, the following shareholders owned of record, beneficially, or both,
5% or more of outstanding Class B Shares: Edward Jones & Co., Maryland Heights, MO owned
approximately 3,079,222 Shares (6.80%) and Citigroup Global Markets, Inc., New York, NY
owned approximately 2,696,356 Shares (5.96%).
  As of January 4, 2005, the following shareholders owned of record, beneficially, or both,
5% or more of outstanding C Shares:  MLPF&S, Jacksonville, FL owned approximately 1,568,700
Shares (15.89%) and Edward Jones & Co., Maryland Heights, MO owned approximately 621,699
Shares (6.30%).
  As of January 4, 2005, the following shareholders owned of record, beneficially, or both,
5% or more of outstanding Class F Shares: Nationwide QPVA, Columbus, OH owned approximately
7,524,301 Shares (32.93), Nationwide Trust Company FSB, Columbus, OH owned approximately
1,871,311 Shares (8.19%) and MLPF&S, Jacksonville, FL owned approximately 1,529,943 Shares
(6.70%). </R>
  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.

<R>Nationwide is organized in the state of Ohio and is a subsidiary of Nationwide Mutual
Insurance Company; organized in the state of Ohio. </R>



TAX INFORMATION


FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue Code (Code)
applicable to regulated investment companies. If these requirements are not met, it will
not receive special tax treatment and will be subject to federal corporate 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 income generated by the securities in the
portfolio, whereas tax- basis income includes, in addition, 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 will qualify for
certain Code provisions that allow its 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
<R>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. The
following tables give information about each Board member and the senior officers of the
Fund. Where required, the tables separately list Board members who are "interested persons"
of the Fund (i.e., "Interested" Board members) and those who are not (i.e., "Independent"
Board members). Unless otherwise noted, the address of each person listed is Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA.  As of December 31, 2004, the
Corporation comprised one portfolio, and the Federated Fund Complex consisted of 44
investment companies (comprising 133 portfolios). Unless otherwise noted, each Officer is
elected annually. Unless otherwise noted, each Board member oversees all portfolios in the
Federated Fund Complex and serves for an indefinite term.

As of January 4, 2005, the Fund's Board and Officers as a group owned less than 1% of the
Fund's outstanding Class A, B, C and F Shares.


INTERESTED Directors BACKGROUND AND COMPENSATION

Name               Principal Occupation(s) for Past Five Years,   Aggregate      Total
Birth Date         Other Directorships Held and Previous          Compensation  Compensation
Address            Position(s)                                    From           From
Positions Held                                                    Corporation   Corporation
with Corporation                                                  (past           and
Date Service                                                      fiscal        Federated
Began                                                               year)       Fund Complex
                                                                                 (past
                                                                                calendar
                                                                                 year)
John F. Donahue*   Principal Occupations: Chairman and Director      $0           $0
Birth Date: July   or Trustee of the Federated Fund Complex;
28, 1924           Chairman and Director, Federated Investors,
CHAIRMAN AND       Inc.
DIRECTOR Began     Previous Positions: Trustee, Federated
serving: May 1992  Investment Management Company and Chairman
                   and Director, Federated Investment
                   Counseling.

J. Christopher     Principal Occupations: Principal Executive        $0           $0
Donahue* Birth     Officer and President of the Federated Fund
Date: April 11,    Complex; Director or Trustee of some of the
1949 PRESIDENT     Funds in the Federated Fund Complex;
AND DIRECTOR       President, Chief Executive Officer and
Began serving:     Director, Federated Investors, Inc.;
May 1992           Chairman and Trustee, Federated Equity
                   Management Company of Pennsylvania; Trustee,
                   Federated Investment Counseling; Chairman
                   and Director, Federated Global Investment
                   Management Corp.; Chairman, Passport
                   Research, Ltd.; Trustee, Federated
                   Shareholder Services Company; Director,
                   Federated Services Company.
                   Previous Positions: President, Federated
                   Investment Counseling; President and Chief
                   Executive Officer, Federated Investment
                   Management Company, Federated Global
                   Investment Management Corp. and Passport
                   Research, Ltd.

Lawrence D.        Principal Occupations: Director or Trustee     $1,742.35    $148,500
Ellis, M.D.*       of the Federated Fund Complex; Professor of
Birth Date:        Medicine, University of Pittsburgh; Medical
October 11, 1932   Director, University of Pittsburgh Medical
3471 Fifth         Center Downtown; Hematologist, Oncologist
Avenue Suite       and Internist, University of Pittsburgh
1111 Pittsburgh,   Medical Center.
PA DIRECTOR        Other Directorships Held: Member, National
Began serving:     Board of Trustees, Leukemia Society o
May 1992           America.
                    Previous Positions: Trustee, University of
                   Pittsburgh; Director, University of
                   Pittsburgh Medical Center.



* Family relationships and reasons for "interested" status: John F. Donahue is the father
  of J. Christopher Donahue; both are "interested" due to the positions they hold with
  Federated and its subsidiaries. Lawrence D. Ellis, M.D. is "interested" because his
  son-in-law is employed by the Fund's principal underwriter, Federated Securities Corp.

INDEPENDENT directors BACKGROUND AND COMPENSATION

Name               Principal Occupation(s) for Past Five Years,   Aggregate  Total
Birth Date         Other Directorships Held and Previous          CompensatioCompensation
Address            Position(s)                                    From       From
Positions Held                                                    CorporationCorporation
with Corporation                                                  (past      and
Date Service                                                      fiscal     Federated
Began                                                             year)      Fund Complex
                                                                             (past
                                                                             calendar
                                                                             year)
Thomas G. Bigley   Principal Occupation: Director or Trustee of   $1,916.59  $163,350
Birth Date:        the Federated Fund Complex. Other
February 3, 1934   Directorships Held: Director, Member of
15 Old Timber      Executive Committee, Children's Hospital of
Trail              Pittsburgh; Director, University of
Pittsburgh, PA     Pittsburgh.
DIRECTOR           Previous Position: Senior Partner, Ernst &
Began serving:     Young LLP.
October 1995

John T. Conroy,    Principal Occupations: Director or Trustee     $1,916.59  $163,350
Jr.                of the Federated Fund Complex; Chairman of
Birth Date: June   the Board, Investment Properties
23, 1937           Corporation; Partner or Trustee in private
Investment         real estate ventures in Southwest Florida.
Properties         Previous Positions: President, Investment
Corporation 3838   Properties Corporation; Senior Vice
North Tamiami      President, John R. Wood and Associates,
Trail Suite 402    Inc., Realtors; President, Naples Property
Naples, FL         Management, Inc. and Northgate Village
DIRECTOR           Development Corporation.
Began serving:
May 1992

Nicholas P.        Principal Occupation: Director or Trustee of   $1,916.59  $163,350
Constantakis       the Federated Fund Complex. Other
Birth Date:        Directorships Held: Director and Member of
September 3,       the Audit Committee, Michael Baker
1939 175           Corporation (engineering and energy services
Woodshire Drive    worldwide). Previous Position: Partner,
Pittsburgh, PA     Anderson Worldwide SC.
DIRECTOR
Began serving:
February 1998

John F.            Principal Occupation: Director or Trustee of   $1,742.35  $148,500
Cunningham         the Federated Fund Complex. Other
Birth Date:        Directorships Held: Chairman, President and
March 5, 1943      Chief Executive Officer, Cunningham & Co.,
 353 El Brillo     Inc. (strategic business consulting);
Way                Trustee Associate, Boston College.
Palm Beach, FL     Previous Positions: Director, Redgate
DIRECTOR           Communications and EMC Corporation (computer
 Began serving:    storage systems); Chairman of the Board and
January 1999       Chief Executive Officer, Computer Consoles,
                   Inc.; President and Chief Operating Officer,
                   Wang Laboratories; Director, First National
                   Bank of Boston; Director, Apollo Computer,
                   Inc.

Peter E. Madden    Principal Occupation: Director or Trustee of   $1,742.35  $148,500
Birth Date:        the Federated Fund Complex
March 16, 1942     Other Directorships Held: Board of
One Royal Palm     Overseers, Babson College.
Way                Previous Positions: Representative,
100 Royal Palm     Commonwealth of Massachusetts General Court;
Way                President, State Street Bank and Trust
Palm Beach, FL     Company and State Street Corporation
DIRECTOR           (retired); Director, VISA USA and VISA
Began serving:     International; Chairman and Director,
May 1992           Massachusetts Bankers Association; Director,
                   Depository Trust Corporation; Director, The
                   Boston Stock Exchange.

Charles F.         Principal Occupations: Director or Trustee     $1,916.59  $163,350
Mansfield, Jr.     of the Federated Fund Complex; Management
Birth Date:        Consultant; Executive Vice President, DVC
April 10, 1945     Group, Inc. (marketing, communications and
80 South Road      technology) (prior to 9/1/00).
Westhampton        Previous Positions: Chief Executive Officer,
Beach, NY          PBTC International Bank; Partner, Arthur
DIRECTOR           Young & Company (now Ernst & Young LLP);
Began serving:     Chief Financial Officer of Retail Banking
January 1999       Sector, Chase Manhattan Bank; Senior Vice
                   President, HSBC Bank USA (formerly, Marine
                   Midland Bank); Vice President, Citibank;
                   Assistant Professor of Banking and Finance,
                   Frank G. Zarb School of Business, Hofstra
                   University.

John E. Murray,    Principal Occupations: Director or Trustee                $178,200
Jr., J.D.,         of the Federated Fund Complex; Chancellor      $2,090.84
S.J.D.             and Law Professor, Duquesne University;
Birth Date:        Partner, Murray, Hogue and Lannis.
December 20,1932   Other Directorships Held: Director, Michael
Chancellor,        Baker Corp. (engineering, construction,
Duquesne           operations and technical services).
University         Previous Positions: President, Duquesne
Pittsburgh, PA     University; Dean and Professor of Law,
DIRECTOR           University of Pittsburgh School of Law; Dean
Began serving:     and Professor of Law, Villanova University
February 1995      School of Law.

Marjorie P.        Principal Occupations: Director or Trustee                $148,500
Smuts              of the Federated Fund Complex; Public          $1,742.35
Birth Date: June   Relations/ Marketing Consultant/Conference
21, 1935           Coordinator.
4905 Bayard        Previous Positions: National Spokesperson,
Street             Aluminum Company of America; television
Pittsburgh, PA     producer; President, Marj Palmer Assoc.;
DIRECTOR           Owner, Scandia Bord.
Began serving:
May 1992

John S. Walsh      Principal Occupations: Director or Trustee                $148,500
Birth Date:        of the Federated Fund Complex; President and   $1,742.35
November 28,       Director, Heat Wagon, Inc. (manufacturer of
1957               construction temporary heaters); President
2604 William       and Director, Manufacturers Products, Inc.
Drive              (distributor of portable construction
 Valparaiso, IN    heaters); President, Portable Heater Parts,
DIRECTOR           a division of Manufacturers Products, Inc.
Began serving:     Previous Position: Vice President, Walsh &
January 1999       Kelly, Inc.




OFFICERS**

Name Birth Date    Principal Occupation(s) and Previous Position(s)
Positions Held
with Corporation
Date Service
Began
John W.            Principal Occupations: Executive Vice President and Secretary of the
McGonigle          Federated Fund Complex; Executive Vice President, Secretary and
Birth Date:        Director, Federated Investors, Inc.
October 26, 1938   Previous Positions: Trustee, Federated Investment Management Company
EXECUTIVE VICE     and Federated Investment Counseling; Director, Federated Global
PRESIDENT AND      Investment Management Corp., Federated Services Company and Federated
SECRETARY          Securities Corp.
Began serving:
May 1992

Richard J.Thomas   Principal Occupations: Principal Financial Officer and Treasurer of
Birth Date: June   the Federated Fund Complex; Senior Vice President, Federated
17, 1954           AdministrativeServices.
TREASURER          Previous Positions: Vice President, Federated Administrative Services;
Began serving:     held various management positions within Funds Financial Services
November 1998      Division of Federated Investors, Inc.

Richard B.         Principal Occupations: Vice Chairman or Vice President of some of the
Fisher             Funds in the Federated Fund Complex; Vice Chairman, Federated
Birth Date: May    Investors, Inc.; Chairman, Federated Securities Corp.
17, 1923           Previous Positions: President and Director or Trustee of some of the
VICE PRESIDENT     Funds in the Federated Fund Complex; Executive Vice President,
Began serving:     Federated Investors, Inc. and Director and Chief Executive Officer,
May 1992           Federated Securities Corp.

William D.         Principal Occupations: Chief Investment Officer of this Fund and
Dawson III Birth   various other Funds in the Federated Fund Complex; Executive Vice
Date: March 3,     President, Federated Investment Counseling, Federated Global
1949               Investment Management Corp., Federated Equity Management Company of
CHIEF INVESTMENT   Pennsylvania, Passport Research, Ltd. and Passport Research II, Ltd.
OFFICER Began      Previous Positions: Executive Vice President and Senior Vice
serving:           President, Federated Investment Counseling Institutional Portfolio
November 1998      Management Services Division; Senior Vice President, Federated
                   Investment Management Company and Passport Research, Ltd.

Joseph M.          Joseph M. Balestrino has been the Fund's Portfolio Manager since
Balestrino         September1993. He is Vice President of the Corporation. Mr.Balestrino
Birth Date:        joined Federated in 1986 and has been a Senior Portfolio Manager and
November 3, 1954   Senior Vice President of the Fund's Adviser since 1998. He was a
VICE PRESIDENT     Portfolio Manager and a Vice President of the Fund's Adviser from 1995
Began serving:     to 1998. Mr.Balestrino served as a Portfolio Manager and an Assistant
November 1998      Vice President of the Adviser from 1993 to 1995. Mr.Balestrino is a
                   Chartered Financial Analyst and received his Master's Degree in Urban
                   and Regional Planning from the University of Pittsburgh.


</R>
**    Officers do not receive any compensation from the Fund.

<R>COMMITTEES of the board
Board     Committee      Committee Functions                                       Meetings
Committee Members                                                                  Held
                                                                                   During
                                                                                   Last
                                                                                   Fiscal
                                                                                    Year
Executive John F.        In between meetings of the full Board, the Executive        One
          Donahue        Committee generally may exercise all the powers of the
          John E.        full Board in the management and direction of the
          Murray, Jr.,   business and conduct of the affairs of the Corporation
          J.D., S.J.D.   in such manner as the Executive Committee shall deem to
                         be in the best interests of the Corporation. However,
                         the Executive Committee cannot elect or remove Board
                         members, increase or decrease the number of Directors,
                         elect or remove any Officer, declare dividends, issue
                         shares or recommend to shareholders any action
                         requiring shareholder approval.

Audit     Thomas G.      The purposes of the Audit Committee are to oversee the     Four
          Bigley         accounting and financial reporting process of the Fund,
          John T.        the Fund`s internal control over financial reporting,
          Conroy, Jr.    and the quality, integrity and independent audit of the
          Nicholas       Fund`s financial statements.  The Committee also
          P.Constantakis oversees or assists the Board with the oversight of
          Charles F.     compliance with legal requirements relating to those
          Mansfield,     matters, approves the engagement and reviews the
          Jr.            qualifications, independence and performance of the
                         Fund's independent registered public accounting firm,
                         acts as a liaison between the independent registered
                         public accounting firm and the Board and reviews the
                         Fund`s internal audit function.

NominatingThomas G.      The Nominating Committee, whose members consist of all      One
          Bigley         Independent Directors, selects and nominates persons
          John T.        for election to the Fund[`s/s'] Board when vacancies
          Conroy, Jr.    occur. The Committee will consider candidates
          Nicholas P.    recommended by shareholders, Independent Directors,
          Constantakis   officers or employees of any of the Fund`s agents or
          John F.        service providers and counsel to the Fund. Any
          Cunningham     shareholder who desires to have an individual
          Peter E.       considered for nomination by the Committee must submit
          Madden         a recommendation in writing to the Secretary of the
          Charles F.     Fund, at the Fund 's address appearing on the back
          Mansfield,     cover of this Statement of Additional Information. The
          Jr.            recommendation should include the name and address of
          John E.        both the shareholder and the candidate and detailed
          Murray, Jr.    information concerning the candidate's qualifications
          Marjorie P.    and experience. In identifying and evaluating
          Smuts          candidates for consideration, the Committee shall
          John S. Walsh  consider such factors as it deems appropriate.  Those
                         factors will ordinarily include:  integrity,
                         intelligence, collegiality, judgment, diversity, skill,
                         business and other experience, qualification as an
                         "Independent Director," the existence of material
                         relationships which may create the appearance of a lack
                         of independence, financial or accounting knowledge and
                         experience, and dedication and willingness to devote
                         the time and attention necessary to fulfill Board
                         responsibilities.

</R>

<R>Board ownership of shares in the fund and in the FEDERATED family of Investment
companies AS OF dECEMBER 31, 2004
Interested Board       Dollar      Aggregate Dollar
Member Name           Range of     Range of Shares
                       Shares     Owned in Federated
                      Owned in        Family of
                        Fund     Investment Companies
John F. Donahue         None        Over $100,000
J.Christopher           None        Over $100,000
Donahue
Lawrence D. Ellis,  $1 - $10,000    Over $100,000
M.D.

Independent Board
Member Name
Thomas G. Bigley        None        Over $100,000
John T. Conroy, Jr.     None        Over $100,000
Nicholas P.             None        Over $100,000
Constantakis
John F. Cunningham      None        Over $100,000
Peter E. Madden         None        Over $100,000
Charles F.              None      $50,001 - $100,000
Mansfield, Jr.
John E. Murray,         None        Over $100,000
Jr., J.D., S.J.D.
Marjorie P. Smuts   $10,001-$50,000 Over $100,000
John S. Walsh           None        Over $100,000

</R>

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 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.
  As required by the 1940 Act, the Fund's Board has reviewed the Fund's investment advisory
contract. The Board's decision to approve the contract reflects the exercise of its
business judgment on whether to continue the existing arrangements. During its review of
the contract, the Board considers many factors, among the most material of which are: the
Fund's investment objectives and long-term performance; the Adviser's management
philosophy, personnel and processes; the preferences and expectations of Fund shareholders
and their relative sophistication; the continuing state of competition in the mutual fund
industry; comparable fees in the mutual fund industry; the range and quality of services
provided to the Fund and its shareholders by the Federated organization in addition to
investment advisory services; and the Fund's relationship to the Federated funds.
  In assessing the Adviser's performance of its obligations, the Board also considers
whether there has occurred a circumstance or event that would constitute a reason for it to
not renew an advisory contract. In this regard, the Board is mindful of the potential
disruptions of the Fund's operations and various risks, uncertainties and other effects
that could occur as a result of a decision to terminate or not renew an advisory contract.
In particular, the Board recognizes that most shareholders have invested in the Fund on the
strength of the Adviser's industry standing and reputation and in the expectation that the
Adviser will have a continuing role in providing advisory services to the Fund.
  The Board also considers the compensation and benefits received by the Adviser. This
includes fees received for services provided to the Fund by other entities in the Federated
organization and research services received by the Adviser from brokers that execute fund
trades, as well as advisory fees. In this regard, the Board is aware that various courts
have interpreted provisions of the 1940 Act and have indicated in their decisions that the
following factors may be relevant to an Adviser's compensation: the nature and quality of
the services provided by the Adviser, including the performance of the Fund; the Adviser's
cost of providing the services; the extent to which the Adviser may realize "economies of
scale" as the Fund grows larger; any indirect benefits that may accrue to the Adviser and
its affiliates as a result of the Adviser's relationship with the Fund; performance and
expenses of comparable funds; and the extent to which the independent Board members are
fully informed about all facts bearing on the Adviser's service and fee. The Fund's Board
is aware of these factors and takes them into account in its review of the Fund's advisory
contract.
  The Board considers and weighs these circumstances in light of its substantial
accumulated experience in governing the Fund and working with Federated on matters relating
to the Federated funds, and is assisted in its deliberations by the advice of independent
legal counsel. In this regard, the Board requests and receives a significant amount of
information about the Fund and the Federated organization. Federated provides much of this
information at each regular meeting of the Board, and furnishes additional reports in
connection with the particular meeting at which the Board's formal review of the advisory
contracts occurs. In between regularly scheduled meetings, the Board may receive
information on particular matters as the need arises. Thus, the Board's evaluation of an
advisory contract is informed by reports covering such matters as: the Adviser's investment
philosophy, personnel, and processes; the Fund's short- and long-term performance (in
absolute terms as well as in relationship to its particular investment program and certain
competitor or "peer group" funds), and comments on the reasons for performance; the Fund's
expenses (including the advisory fee itself and the overall expense structure of the Fund,
both in absolute terms and relative to similar and/or competing funds, with due regard for
contractual or voluntary expense limitations); the use and allocation of brokerage
commissions derived from trading the Fund's portfolio securities; the nature and extent of
the advisory and other services provided to the Fund by the Adviser and its affiliates;
compliance and audit reports concerning the Federated funds and the Federated companies
that service them; and relevant developments in the mutual fund industry and how the
Federated funds and/or Federated are responding to them.
  The Board also receives financial information about Federated, including reports on the
compensation and benefits Federated derives from its relationships with the Federated
funds. These reports cover not only the fees under the advisory contracts, but also fees
received by Federated's subsidiaries for providing other services to the Federated funds
under separate contracts (e.g., for serving as the Federated funds' administrator and
transfer agent). The reports also discuss any indirect benefit Federated may derive from
its receipt of research services from brokers who execute Federated fund trades.
  The Board bases its decision to approve an advisory contract on the totality of the
circumstances and relevant factors, and with a view to past and future long-term
considerations. Not all of the factors and considerations identified above are relevant to
every Federated fund, nor does the Board consider any one of them to be determinative.
Because the totality of circumstances includes considering the relationship of each
Federated fund, the Board does not approach consideration of every Federated fund's
advisory contract as if that were the only Federated fund.

Services Agreement
Federated Advisory Services Company, an affiliate of the Adviser, provides certain support
services to the Adviser. The fee for these services is paid by the Adviser and not by the
Fund.

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.

Code of Ethics Restrictions on Personal Trading
As required by SEC rules, the Fund, its Adviser, and its Distributor have adopted codes of
ethics. These codes govern securities trading activities of investment personnel, Fund
Directors, and certain other employees. Although they do permit these people to trade in
securities, including those that the Fund could buy, as well as Shares of the Fund, they
also contain significant safeguards designed to protect the Fund and its shareholders from
abuses in this area, such as requirements to obtain prior approval for, and to report,
particular transactions.

Voting Proxies on Fund Portfolio Securities
The Board has delegated to the Adviser authority to vote proxies on the securities held in
the Fund's portfolio. The Board has also approved the Adviser's policies and procedures for
voting the proxies, which are described below.

Proxy Voting Policies
The Adviser's general policy is to cast proxy votes in favor of proposals that the Adviser
anticipates will enhance the long-term value of the securities being voted. Generally, this
will mean voting for proposals that the Adviser believes will: improve the management of a
company; increase the rights or preferences of the voted securities; and/or increase the
chance that a premium offer would be made for the company or for the voted securities.
  The following examples illustrate how these general policies may apply to proposals
submitted by a company's board of directors. However, whether the Adviser supports or
opposes a proposal will always depend on the specific circumstances described in the proxy
statement and other available information.
  On matters of corporate governance, generally the Adviser will vote for proposals to:
require independent tabulation of proxies and/or confidential voting by shareholders;
reorganize in another jurisdiction (unless it would reduce the rights or preferences of the
securities being voted); and repeal a shareholder rights plan (also known as a "poison
pill"). The Adviser will generally vote against the adoption of such a plan (unless the
plan is designed to facilitate, rather than prevent, unsolicited offers for the company).
  On matters of capital structure, generally the Adviser will vote: against proposals to
authorize or issue shares that are senior in priority or voting rights to the securities
being voted; for proposals to grant preemptive rights to the securities being voted; and
against proposals to eliminate such preemptive rights.
  On matters relating to management compensation, generally the Adviser will vote: for
stock incentive plans that align the recipients' interests with the interests of
shareholders without creating undue dilution; and against proposals that would permit the
amendment or replacement of outstanding stock incentives with new stock incentives having
more favorable terms.

  On matters relating to corporate transactions, the Adviser will vote proxies relating to
proposed mergers, capital reorganizations, and similar transactions in accordance with the
general policy, based upon its analysis of the proposed transaction. The Adviser will vote
proxies in contested elections of directors in accordance with the general policy, based
upon its analysis of the opposing slates and their respective proposed business strategies.
Some transactions may also involve proposed changes to the company's corporate governance,
capital structure or management compensation. The Adviser will vote on such changes based
on its evaluation of the proposed transaction or contested election. In these
circumstances, the Adviser may vote in a manner contrary to the general practice for
similar proposals made outside the context of such a proposed transaction or change in the
board. For example, if the Adviser decides to vote against a proposed transaction, it may
vote for anti-takeover measures reasonably designed to prevent the transaction, even though
the Adviser typically votes against such measures in other contexts.
  The Adviser generally votes against proposals submitted by shareholders without the
favorable recommendation of a company's board. The Adviser believes that a company's board
should manage its business and policies, and that shareholders who seek specific changes
should strive to convince the board of their merits or seek direct representation on the
board.
  In addition, the Adviser will not vote if it determines that the consequences or costs
outweigh the potential benefit of voting. For example, if a foreign market requires
shareholders casting proxies to retain the voted shares until the meeting date (thereby
rendering the shares "illiquid" for some period of time), the Adviser will not vote proxies
for such shares.

Proxy Voting Procedures
The Adviser has established a Proxy Voting Committee (Proxy Committee), to exercise all
voting discretion granted to the Adviser by the Board in accordance with the proxy voting
policies. The Adviser has hired Investor Responsibility Research Center (IRRC) to obtain,
vote, and record proxies in accordance with the Proxy Committee's directions. The Proxy
Committee directs IRRC by means of Proxy Voting Guidelines, and IRRC may vote any proxy as
directed in the Proxy Voting Guidelines without further direction from the Proxy Committee
(and may make any determinations required to implement the Proxy Voting Guidelines).
However, if the Proxy Voting Guidelines require case-by-case direction for a proposal, IRRC
will provide the Proxy Committee with all information that it has obtained regarding the
proposal and the Proxy Committee will provide specific direction to IRRC. The Adviser's
proxy voting procedures generally permit the Proxy Committee to amend the Proxy Voting
Guidelines, or override the directions provided in such Guidelines, whenever necessary to
comply with the proxy voting policies.

Conflicts of Interest
The Adviser has adopted procedures to address situations where a matter on which a proxy is
sought may present a potential conflict between the interests of the Fund (and its
shareholders) and those of the Adviser or Distributor. This may occur where a significant
business relationship exists between the Adviser (or its affiliates) and a company involved
with a proxy vote. A company that is a proponent, opponent, or the subject of a proxy vote,
and which to the knowledge of the Proxy Committee has this type of significant business
relationship, is referred to as an "Interested Company."
  The Adviser has implemented the following procedures in order to avoid concerns that the
conflicting interests of the Adviser have influenced proxy votes. Any employee of the
Adviser who is contacted by an Interested Company regarding proxies to be voted by the
Adviser must refer the Interested Company to a member of the Proxy Committee, and must
inform the Interested Company that the Proxy Committee has exclusive authority to determine
how the Adviser will vote. Any Proxy Committee member contacted by an Interested Company
must report it to the full Proxy Committee and provide a written summary of the
communication. Under no circumstances will the Proxy Committee or any member of the Proxy
Committee make a commitment to an Interested Company regarding the voting of proxies or
disclose to an Interested Company how the Proxy Committee has directed such proxies to be
voted. If the Proxy Voting Guidelines already provide specific direction on the proposal in
question, the Proxy Committee shall not alter or amend such directions. If the Proxy Voting
Guidelines require the Proxy Committee to provide further direction, the Proxy Committee
shall do so in accordance with the proxy voting policies, without regard for the interests
of the Adviser with respect to the Interested Company. If the Proxy Committee provides any
direction as to the voting of proxies relating to a proposal affecting an Interested
Company, it must disclose to the Fund's Board information regarding: the significant
business relationship; any material communication with the Interested Company; the
matter(s) voted on; and how, and why, the Adviser voted as it did.
  If the Fund holds shares of another investment company for which the Adviser (or an
affiliate) acts as an investment adviser, the Proxy Committee will vote the Fund's proxies
in the same proportion as the votes cast by shareholders who are not clients of the Adviser
at any shareholders' meeting called by such investment company, unless otherwise directed
by the Board.
<R>Proxy Voting Report
A report on "Form N-PX" of how the Fund voted any proxies during the most recent 12-month
period ended June 30 is available through Federated's website.  Go to
www.federatedinvestors.com; select "Products;" select the Fund; then use the link to
"Prospectuses and Regulatory Reports" to access the link to Form N-PX.

PORTFOLIO HOLDINGS INFORMATION
Information concerning the Fund's portfolio holdings is available in the "Products" section
of the Federated website at www.federatedinvestors.com.  A complete listing of the Fund's
portfolio holdings as of the end of each calendar quarter is posted on the website 30 days
(or the next business day) after the end of the quarter and remains posted until replaced
by the information for the succeeding quarter.  Summary portfolio composition information
as of the close of each month is posted on the website 15 days (or the next business day)
after month-end and remains until replaced by the information for the succeeding month.
The summary portfolio composition information may include:  identification of the Fund's
top ten holdings, recent purchase and sale transactions and percentage breakdowns of the
portfolio by sector and credit quality.

To access this information from the "Products" section of the website, click on "Portfolio
Holdings" and select the appropriate link opposite the name of the Fund, or select the name
of the Fund from the menus on the "Products" section, and from the Fund's page click on the
"Portfolio Holdings" or "Composition" link.  A user is required to register on the website
the first time the user accesses this information.

You may also access from the "Products" section of the website portfolio information as of
the end of the Fund's fiscal quarters.  The Fund's annual and semiannual reports, which
contain complete listings of the Fund's portfolio holdings as of the end of the Fund's
second and fourth fiscal quarters, may be accessed by selecting the name of the Fund,
clicking on "Prospectuses and Regulatory Reports" and selecting the link to the appropriate
PDF.  Complete listings of the Fund's portfolio holdings as of the end of the Fund's first
and third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the
"Products" section and then selecting the appropriate link opposite the name of the Fund.
Fiscal quarter information is made available on the website within 70 days after the end of
the fiscal quarter.  This information is also available in reports filed with the SEC at
the SEC's website at www.sec.gov.

The disclosure policy of the Fund and the Adviser prohibits the disclosure of portfolio
holdings information to any investor or intermediary before the same information is made
available to other investors.  Employees of the Adviser or its affiliates who have access
to nonpublic information concerning the Fund's portfolio holdings are prohibited from
trading securities on the basis of this information.  Such persons must report all personal
securities trades and obtain pre-clearance for all personal securities trades other than
mutual fund shares.

Firms that provide administrative, custody, financial, accounting, legal or other services
to the Fund may receive nonpublic information about Fund portfolio holdings for purposes
relating to their services.  The Fund may also provide portfolio holdings information to
publications that rate, rank or otherwise categorize investment companies.  Traders or
portfolio managers may provide "interest" lists to facilitate portfolio trading if the list
reflects only that subset of the portfolio for which the trader or portfolio manager is
seeking market interest.  A list of service providers, publications and other third parties
who may receive nonpublic portfolio holdings information appears in the Appendix to this
SAI.

The furnishing of nonpublic portfolio holdings information to any third party (other than
authorized governmental or regulatory personnel) requires the prior approval of the
President of the Adviser and of the Chief Compliance Officer of the Fund.  The President of
the Adviser and the Chief Compliance Officer will approve the furnishing of nonpublic
portfolio holdings information to a third party only if they consider the furnishing of
such information to be in the best interests of the Fund and its shareholders.   In that
regard, and to address possible conflicts between the interests of Fund shareholders and
those of the Adviser and its affiliates, the following procedures apply. No consideration
may be received by the Fund, the Adviser, any affiliate of the Adviser or any of their
employees in connection with the disclosure of portfolio holdings information.  Before
information is furnished, the third party must sign a written agreement that it will
safeguard the confidentiality of the information, will use it only for the purposes for
which it is furnished and will not use it in connection with the trading of any security.
Persons approved to receive nonpublic portfolio holdings information will receive it as
often as necessary for the purpose for which it is provided.  Such information may be
furnished as frequently as daily and often with no time lag between the date of the
information and the date it is furnished. The Board receives and reviews annually a list of
the persons who receive nonpublic portfolio holdings information and the purposes for which
it is furnished. </R>

BROKERAGE TRANSACTIONS

<R>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 makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Fund's Board.

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. </R>


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.

ADMINISTRATOR
Federated Administrative Services (FAS), a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting services) necessary
to operate the Fund. FAS provides these at the following annual rate of the average
aggregate daily net assets of all Federated funds as specified below:
Maximum Administrative    Average Aggregate
Fee                       Daily Net Assets
                          of the Federated
                          Funds
0.150 of 1%               on the first $5
                          billion
0.125 of 1%               on the next $5
                          billion
0.100 of 1%               on the next $10
                          billion
0.075 of 1%               on assets over
                          $20 billion

The administrative fee received during any fiscal year shall be at least $150,000 per
portfolio and $40,000 per each additional class of Shares. FAS may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
  FAS 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
<R>State Street Bank and Trust Company, the Fund's registered transfer agent, maintains all
necessary shareholder records. </R>


<R>INDEPENDENT registered PUBLIC ACCOUNTing firm
The independent registered public accounting firm for the Fund, Deloitte and Touche LLP,
conducts its audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States), which require it to plan and perform its audits to provide
reasonable assurance about whether the Fund's financial statements and financial highlights
are free of material misstatement. </R>

<R>FEES PAID BY THE FUND FOR SERVICES

For the Year Ended        20041        2003          2002
November 30
Advisory Fee Earned     $8,677,563  $8,847,541    $7,555,557
Advisory Fee            1,438,299   1,246,172     1,130,172
Reduction
Advisory Fee              2,975       5,494         2,615
Reimbursement
Administrative Fee       881,640     888,098       757,571
12b-1 Fee:
  Class A Shares            --          --
  Class B Shares        3,346,892   3,526,874
  Class C Shares         675,655     648,303
Shareholder Services
Fee:
  Class A Shares         789,141     732,210
  Class B Shares        1,115,668   1,175,625
  Class C Shares         225,228     216,101
  Class F Shares         519,983     590,817










</R>
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 SEC's standard methods for
calculating performance applicable to all mutual funds. The SEC also permits this standard
performance information to be accompanied by non-standard performance information.
  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 and/or the
value of portfolio holdings 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
<R>Total returns are given for the one-year, five-year and ten-year periods ended
November 30, 2004.
  Yield is given for the 30-day period ended November 30, 2004.


                 30-Day    1 Year   5          Start of
                  Period            Years    Performance
                                             on 6/28/1995
Class A:
Total Return
  Before Taxes     N/A     2.03%    6.40%       6.23%
  After Taxes on   N/A    (0.12)%   3.60%       3.34%
  Distributions
  After Taxes on   N/A     1.28%    3.70%       3.47%
  Distributions
  and Sale of
  Shares
Yield             5.14%     N/A      N/A         N/A

                 30-Day    1 Year   5          Start of
                  Period            Years    Performance
                                             on 6/28/1995
Class B:
Total Return
  Before Taxes     N/A     0.62%    6.24%       6.04%
  After Taxes on   N/A    (1.32)%   3.72%       3.44%
  Distributions
  After Taxes on   N/A     0.37%    3.74%       3.51%
  Distributions
  and Sale of
  Shares
Yield             4.58%     N/A      N/A         N/A

                 30-Day    1 Year   5          Start of
                  Period            Years    Performance
                                             on 6/28/1995
Class C:
Total Return
  Before Taxes     N/A     3.97%    6.33%       5.81%
  After Taxes on   N/A     2.05%    3.85%       3.26%
  Distributions
  After Taxes on   N/A     2.55%    3.85%       3.34%
  Distributions
  and Sale of
  Shares
Yield             4.53%     N/A      N/A         N/A

                 30-Day    1 Year   5             10
                  Period            Years       Years
Class F:
Total Return
  Before Taxes     N/A     4.90%    7.17%       7.50%
  After Taxes on   N/A     2.69%    4.38%       4.57%
  Distributions
  After Taxes on   N/A     3.14%    4.37%       4.57%
  Distributions
  and Sale of
  Shares
Yield             5.30%     N/A      N/A         N/A





</R>

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 $10,000 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 $10,000, less any applicable sales charge, adjusted
over the period by any additional Shares, assuming the annual reinvestment of all dividends
and distributions.
  Total returns after taxes are calculated in a similar manner, but reflect additional
standard assumptions required by the SEC.

YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per Share
earned by the Shares over a 30-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 30-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 professionals 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 Fund; 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:
  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 Fund; 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:

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

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.

Lehman Brothers Government/Credit (Total) Index
Comprised of approximately 5,000 issues which include: non- convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed by the
U.S. government and quasi-federal corporations; and publicly issued, fixed rate, non-
convertible domestic bonds of companies in industry, public utilities, and finance. The
average maturity of these bonds approximates nine years. Tracked by Lehman Brothers, Inc.,
the index calculates total returns for one-month, three-month, twelve- month, and ten-year
periods and year-to-date.

Salomon Brothers Aaa-Aa Corporate Index
Salomon Brothers Aaa-Aa Corporate Index calculates total returns of approximately 775
issues which include long-term, high grade domestic corporate taxable bonds, rated AAA-AA
with maturities of twelve years or more and companies in industry, public utilities, and
finance.

Merrill Lynch Corporate & Government Master Index
Merrill Lynch Corporate & Government Master Index is an unmanaged index comprised of
approximately 4,821 issues which include corporate debt obligations rated BBB or better and
publicly issued, non-convertible domestic debt of the U.S. government or any agency
thereof. These quality parameters are based on composites of ratings assigned by Standard
and Poor's Ratings Group and Moody's Investors Service. Only notes and bonds with a minimum
maturity of one year are included.

Merrill Lynch Corporate Master Index
An unmanaged index comprised of approximately 4,256 corporate debt obligations rated BBB or
better. These quality parameters are based on composites of ratings assigned by Standard
and Poor's Ratings Group and Moody's Investors Service, Inc. Only bonds with minimum
maturity of one year are included.

Lehman Brothers Credit Bond Index
The Lehman Brothers Credit Bond Index is comprised of a large universe of bonds issued by
industrial, utility and financial companies which have a minimum rating of Baa by Moody's
Investors Service, BBB by Standard and Poor's Ratings Group or, in the case of bank bonds
not rated by either of the previously mentioned services, BBB by Fitch, IBCA, Inc.

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



WHO IS FEDERATED INVESTORS, INC.?


<R>Federated and its subsidiaries are dedicated to providing you with world-class
investment management.  From offices in Pittsburgh, New York City and Frankfurt, Federated
is a firm with independent research, product breadth and industry standing.

Federated seeks to achieve superior and sustainable investment performance for a broad
array of global clients through a disciplined investment process and an information
advantage created by proprietary fundamental research.  Federated is distinctive in our
disciplined process that integrates proprietary research with trading and portfolio
management.

Federated overview

Equities
As of December 31, 2004, Federated managed 34 equity funds totaling approximately $26.0
billion in assets across growth, value, equity income, international, index and asset
allocation styles.


Taxable Fixed Income
As of December 31, 2004, Federated managed 31 taxable bond funds including, high-yield,
multi-sector, mortgage-backed, U.S. government corporate and international, with assets
approximating $17.7 billion.


Tax Free Fixed Income
As of December 31, 2004, Federated managed 15 municipal bond funds with approximately $3.4
billion in assets and 22 municipal money market funds with approximately $24.4 billion in
total assets.


Money Market Funds
As of December 31, 2004, Federated managed $110.6 billion in assets across 53 money market
funds, including 19 government, 11 prime, 22 municipal and 1 euro-denominated with assets
approximating $43.9 billion, $42.1 billion, $24.4 billion and $58.9 million.

The Chief Investment  Officers  responsible for oversight of the various  investment sectors
within Federated are: Stephen F. Auth, CFA for Global Equity;  Robert J. Ostrowski,  CFA for
Taxable  Fixed  Income;  Mary Jo  Ochson,  CFA for Tax Free  Fixed  Income;  and  Deborah A.
Cunningham, CFA for Money Market funds.

</R>


FINANCIAL INFORMATION


<R>The Financial Statements for the Fund for the fiscal year ended November 30, 2004 are
incorporated herein by reference to the Annual Report to Shareholders of Federated Bond
Fund dated November 30, 2004. </R>


INVESTMENT RATINGS


<R> Standard and Poor's Long-Term Debt Rating Definitions
AAA--Highest credit quality. 'AAA' ratings denote the lowest expectation of credit risk.
They are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events.

AA--Very high credit quality. 'AA' ratings denote a very low expectation of credit risk.
They indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.

A--High credit quality. 'A' ratings denote a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic conditions than
is the case for higher ratings.

BBB--Good credit quality. 'BBB' ratings indicate that there is currently a low expectation
of credit risk. The capacity for timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in economic conditions are more likely
to impair this capacity. This is the lowest investment-grade category.

BB--Speculative. 'BB' ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time; however,
business or financial alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.

B--Highly speculative. 'B' ratings indicate that significant credit risk is present, but a
limited margin of safety remains. Financial commitments are currently being met; however,
capacity for continued payment is contingent upon a sustained, favourable business and
economic environment.

CCC, CC, C--High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon sustained, favourable business or economic
developments. A 'CC' rating indicates that default of some kind appears probable. 'C'
ratings signal imminent default.

Moody's Investors Service Long-Term Debt Ratings
Aaa-- Bonds and preferred stock 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 and preferred stock 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 risk appear
somewhat larger than the Aaa securities.

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

NR--Indicates that both the bonds and the obligor or credit enhancer are not currently
rated by S&P or Moody's with respect to short-term indebtedness. However, management
considers them to be of comparable quality to securities rated A-1 or P-1.

NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated AAA by S&P
or Aaa by Moody's.

NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated AA by S&P
or Aa by Moody's.

NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated A by S&P or
Moody's.

Moody's Investors Service Commercial Paper Ratings
Prime-1--Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will often be
evidenced by many of the following characteristics: leading market positions in well
established industries, high rates of return on funds employed, conservative capitalization
structure with moderate reliance on debt and ample asset protection, broad margins in
earning coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of alternate
liquidity.

Prime-2--Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt 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-- A short-term obligation rated 'A-1' is rated in the highest category by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitment on these obligations
is extremely strong.

A-2-- A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial commitment on the
obligation is satisfactory.

Fitch Ratings Commercial Paper Rating Definitions
F-1--Indicates the strongest capacity for timely payment of financial commitments relative
to other issuers or issues in the same country. Under their national rating scale, this
rating is assigned to the "best" credit risk relative to all others in the same country and
is normally assigned to all financial commitments issued or guaranteed by the sovereign
state. Where the credit risk is particularly strong, a "+" is added to the assigned rating.

F-2-- Indicates a satisfactory capacity for timely payment of financial commitments
relative to other issuers or issues in the same country. However, the margin of safety is
not as great as in the case of the higher ratings.

</R>



ADDRESSES


Federated bond fund
Class A Shares
Class B Shares
Class C Shares
Class F Shares

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

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

Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<R>Custodian, Transfer Agent and Dividend Disbursing Agent</R>
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600

<R>Independent Registered Public Accounting Firm </R>
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116


<R>APPENDIX


The following is a list of persons other than the Adviser and its affiliates that may
receive nonpublic portfolio holdings information concerning the Fund:

Custodian
State Street Bank and Trust Company

Securities Lending Agent
HSBC
State Street Bank and Trust Company

Independent Registered Public Accounting Firm
Deloitte & Touche LLP

Legal Counsel
Dickstein, Shapiro, Morin & Oshinsky LLP
Reed Smith LLP

Service Providers
Bloomberg
Factset
Wilshire Associates, Inc.

Security Pricing Services
FT Interactive Data
Reuters

Ratings Agencies
Standard & Poor's

Performance Reporting/Publications
Fidelity-Strategic Advisors
Lipper, Inc.
Morningstar
NASDAQ
Value Line
Wiesenberger/Thomson Financial

Other
Investment Company Institute
Astec Consulting Group, Inc.

</R>




PART C.     OTHER INFORMATION.

Item 22.
            (a)               Copy of Articles of Incorporation of the
                              Registrant; (1)
                  (i)         Conformed copy of Articles Supplementary, dated
                              July 1, 1993; (12)
                  (ii)        Conformed copy of Articles Supplementary, dated
                              May 20, 1994; (12)
                  (iii)       Conformed copy of Articles Supplementary, dated
                              May 18, 1995; (12)
                  (iv)        Conformed copy of Articles of Amendment, dated
                              March 29, 1996; (12)
                  (v)         Conformed copy of Articles Supplementary, dated
                              November 15, 1996; (12)
                  (vi)        Conformed copy of Certificate of Correction,
                              dated February 28, 1997; (12)
                  (vii)       Conformed copy of Certificate of Correction,
                              dated February 28, 1997; (12)
            (b)               Copy of By-Laws of the Registrant; (1)
                  (i)         Copy of Amendment No.1 to the By-Laws of
                              Registrant; (11)
                  (ii)        Copy of Amendment No.2 to the By-Laws of
                              Registrant; (11)
                  (iii)       Copy of Amendment No.3 to the By-Laws of
                              Registrant; (11)
                  (iv)        Copy of Amendment No. 4 to the By-Laws of
                              Registrant; (14)
                  (v)         Copy of Amendment No. 5 to the By-Laws of
                              Registrant; (15)
            (c)   (i)         Copies of Specimen Certificates for Shares of
                              Capital Stock of Federated Bond Fund; (5)
                  (ii)        Copy of Specimen Certificate for Shares of
                              Common Stock of Class F Shares of Federated Bond
                              Fund; (7)
            (d)               Conformed copy of Investment Advisory Contract
                              of the Registrant; (3)
                  (i)         Conformed copy of Limited Power of Attorney of
                              the Adviser; (14)
                  (ii)        Conformed copy of Amendment to Investment
                              Advisory Contract of the Registrant; (14)
            (e)   (i)         Copy of Distributor's Contract of Registrant; (2)
                  (ii)        Conformed copy of Exhibits C and D to
                              Distributor's Contract; (4)
                  (iii)       Conformed copy of Exhibits E, F, and G to
                              Distributor's Contract; (5)
                  (iv)        Conformed copy of Distributor's Contract (Class
                              B Shares) including Exhibit 1 and Schedule A;
                              (10)
                  (v)         The Registrant hereby incorporates the conformed
                              copy of the specimen Mutual Funds Sales and
                              Service Agreement; Mutual Funds Service
                              Agreement; and Plan Trustee/Mutual Funds Service
                              Agreement from Item 24(b)(6) of the Cash Trust
                              Series II Registration Statement on Form N-1A,
                              filed with the Commission on July 24, 1995.
                              (File Nos. 33-38550 and 811-6269);
                  (vi)        Conformed copy of Amendment to Distributor's
                              Contract of Registrant; (14)
                  (vii)       Conformed copy of Amendment to Distributor's
                              Contract of Registrant; (15)
            (f)               Not applicable;
            (g)   (i)         Conformed copy of Custodian Agreement of the
                              Registrant;(3)
                  (ii)        Conformed copy of State Street Domestic Custody
                              Fee Schedule; (9)
            (h)   (i)         Conformed copy of Principal Shareholder
                              Servicer's Agreement (Class B Shares) including
                              Exhibit 1 and Schedule A; (10)
                  (ii)        Conformed copy of Shareholder Services Agreement
                              (Class B Shares) including Exhibit 1 and
                              Schedule A; (10)
                  (iii)       Amended and Restated Agreement for Fund
                              Accounting Services, Administrative Services,
                              Transfer Agency Services, and Custody Services
                              Procurement; (11)
                  (iv)        The Registrant hereby incorporates the conformed
                              copy of Amendment No. 2 to the Amended and
                              Restated Agreement for Fund Accounting Services,
                              Administrative Services, Transfer Agency
                              Services and Custody Services Procurement from
                              Item 23 (h)(v) of the Federated U. S. Government
                              Securities: 2-5 Years Registration Statement on
                              Form N-1A, filed with the Commission on March
                              30, 2004. (File Nos. 2-75769 and 811-3387);
                  (v)         The Registrant hereby incorporates the conformed
                              copy of Amendment No. 3 to the Amended and
                              Restated Agreement for Fund Accounting Services,
                              Administrative Services, Transfer Agency
                              Services and Custody Services Procurement from
                              Item 23 (h)(v) of the Federated U. S. Government
                              Securities: 2-5 Years Registration Statement on
                              Form N-1A, filed with the Commission on March
                              30, 2004. (File Nos. 2-75769 and 811-3387);
                  (vi)        The Registrant hereby incorporates by reference
                              the conformed copy of the Shareholder Services
                              Sub-Contract between Fidelity and Federated
                              Shareholder Services from Item 24(b)(9)(iii) of
                              the Federated GNMA Trust Registration Statement
                              on Form N-1A, filed with the Commission on March
                              25, 1996 (File Nos. 2-75670 and 811-3375);
                  (vii)       Conformed copy of Second Amended and Restated
                              Shareholder Services Agreement; (13)
                  (viii)      The responses described in Item
                  23(e)(iii) are hereby incorporated              by reference;
                  (ix)        The Registrant hereby incorporates
                  by reference the conformed copy of              the
                  Agreement for Administrative              Services from Item
                  23 (h)(vix) of                the Federated Index Trust
                  Registration Statement on Form N1A,             filed with
                  the Commission on                         December 30, 2003.
                  (File Nos. 33-                33852 and 811-6061).
                        (x)   The Registrant hereby incorporates
                  the conformed copy of the Second                Amended and
                  Restated Services                   Agreement, with attached
                  Schedule 1        revised 6/30/04, from Item (h)(vii)
                  of the Cash Trust Series, Inc.                  Registration
                  Statement on Form N1A,        filed with the Commission on
                  July              29, 2004. (File Nos. 33-29838 and
                  811-5843);
                        (xi)  The Registrant hereby incorporates
                  the conformed copy of the Financial
                  Administration and Accounting                   Services
                  Agreement, with attached                  Exhibit A revised
                  6/30/04, from                 Item (h)(vii) of the Cash
                  Trust                   Series, Inc. Registration Statement
                  on Form N-1A, filed with the                    Commission
                  on July 29, 2004. (File                   Nos. 33-29838 and
                  811-5843);
            (i)               Copy of Opinion and Consent of Counsel as to
                              legality of shares being registered; (2)
            (j)               Conformed copy of Consent of Independent
                              Registered Public Accounting Firm; (+)
            (k)               Not applicable;
            (l)               Not applicable;
            (m)   (i)         Copy of Distribution Plan; (2)
                  (ii)        Conformed Copy of Exhibits B and C to
                              Distribution Plan; (4)
                  (iii)       Conformed Copy of Exhibits D, E, and F to
                              Distribution Plan; (5)
                  (iv)        Conformed Copy of Distribution Plan through and
                              including Exhibit A (Class A Shares) and Exhibit
                              B (Class C Shares) (17)
                  (v)         Conformed copy of Exhibit 1 to the 12b-1
                              Distribution Plan (Class B Shares) of the
                              Registrant; (10)
                  (vi)        The responses described in Item 23(e)(iii) are
                              hereby incorporated by reference;
            (n)               The Registrant hereby incorporates the conformed
                              copy of the Multiple Class Plan from Item (n) of
                              Federated GNMA Trust Registration Statement on
                              Form N-1A, filed with the Commission on March
                              29, 2004. (File Nos. 2-75670 and 811-3375);
            (o)   (i)         Conformed Copy of Power of Attorney; (12)
                  (ii)        Conformed Copy of Power of Attorney of Chief
                              Investment Officer of the Registrant (12)
                  (iii)       Conformed Copy of Power of Attorney of Trustee
                              John F. Cunningham; (12)
                  (iv)        Conformed Copy of Power of Attorney of Trustee
                              Charles F. Mansfield, Jr.; (12)
                  (v)         Conformed Copy of Power of Attorney of Trustee
                              John S. Walsh. (12)
            (p)               The Registrant hereby incorporates the conformed
                              copy of the Code of Ethics for Access Persons
                              from Item 23(p) of the Money Market Obligations
                              Trust Registration Statement on Form N-1A filed
                              with the Commission on February 26, 2004. (File
                              Nos. 33-31602 and 811-5950).

________________________________________
+     All exhibits have been filed electronically via EDGAR.
(1)   Response is incorporated by reference to Registrant's Initial
      Registration Statement on Form N-1A filed August 21, 1992.  (File No.
      33-48847 and 811-07021)
(2)   Response is incorporated by reference to Registrant's Pre-Effective
      Amendment No. 1 on Form N-1A filed September 8, 1992. (File No. 33-48847
      and 811-07021)
(3)   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 4 on Form N-1A filed December 29, 1993.  (File No.
      33-48847 and 811-07021)
(4)   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 5 on Form N-1A filed December 23, 1994 (File No. 33-48847
      and 811-07021)
(5)   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 7 on Form N-1A filed July 27, 1995 (File No. 33-48847 and
      811-07021)
(7)   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 11 on Form N-1A filed February 18, 1997 (File No. 33-48847
      and 811-07021)
(9)   Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 13 on Form N-1A filed October 24, 1997 (File No. 33-48847
      and 811-07021)
(10)  Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 15 on Form N-1A filed December 31, 1997 (File No. 33-48847
      and 811-07021)
(11)  Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 16 on Form N-1A filed October 30, 1998 (File No. 33-48847
      and 811-07021)
(12)  Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 18 on Form N-1A filed October 29, 1999 (File No.
      33-48847and 811-07021)
(13)  Response is incorporated by reference to Registrant's Post-Effective
      Amendment No. 21 on Form N-1A filed January 23, 2002 (File No. 33-48847
      and 811-07021)
(14)  Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 22 on form N-1A filed January 29, 2003. (File No. 33-48847 and
      811-07021)
(15)  Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 23 on Form N-1A filed November 26, 2003. (File No. 33-48847 and
      811-07021)
(16)  Response is incorporated by reference to Registrant's Post-Effective Amendment
      No. 24 on Form N-1A filed January 29, 2004. (File No. 33-48847 and
      811-07021)
(17)  Response is incorporated by reference to Registrant's Post- Effective Amendment
      No. 25 on Form N-1A filed November 19, 2004. (File No. 33-48847 and
      811-07021)


Item 23.    Persons Controlled by or Under Common Control with Fund:

            None

Item 24.    Indemnification:  (1)

Item 25.    Business and Other Connections of Investment Adviser:

            For a description of the other business of the investment adviser, see
            the section entitled "Who Manages the Fund?" in Part A. The affiliations
            with the Registrant of two of the Trustees and two of the Officers of the
            investment adviser are included in Part B of this Registration Statement
            under "Who Manages and Provides Services to the Fund?"  The remaining
            Trustees of the investment adviser and, in parentheses, their principal
            occupations are:  Thomas R. Donahue, (Chief Financial Officer, Federated
            Investors, Inc.), 1001 Liberty Avenue, Pittsburgh, PA, 15222-3779 and
            Mark D. Olson (a principal of the firm, Mark D. Olson & Company, L.L.C.
            and Partner, Wilson, Halbrook & Bayard, P.A.), 800 Delaware Avenue, P.O.
            Box 2305, Wilmington, DE  19899-2305.

The remaining Officers of the investment adviser are:

President/ Chief Executive Officer
and Trustee:                                    Keith M. Schappert

Vice Chairman:                                  William D. Dawson, III

Senior Vice Presidents:                         Joseph M. Balestrino
                                                Jonathan C. Conley
                                                Deborah A. Cunningham
                                                Mark E. Durbiano
                                                Robert M. Kowit
                                                Jeffrey A. Kozemchak
                                                Susan M. Nason
                                                Mary Jo Ochson
                                                Robert J. Ostrowski
                                                Richard Tito

Vice Presidents:                                Todd A. Abraham
                                                J. Scott Albrecht
                                                Randall S. Bauer
                                                Nancy J.Belz
                                                G. Andrew Bonnewell
                                                Lee R. Cunningham, II
                                                B. Anthony Delserone,Jr.      Donald
T. Ellenberger
                                                Eamonn G. Folan
                                                John T. Gentry
                                                Patricia L. Heagy
                                                Susan R. Hill
                                                William R. Jamison
                                                Nathan H. Kehm
                                                John C. Kerber
                                                J. Andrew Kirschler
                                                Marian R. Marinack
                                                Kevin McCloskey
                                                Natalie F. Metz
                                                Thomas J. Mitchell
                                                Joseph M. Natoli
                                                Mary Kay Pavuk
                                                Jeffrey A. Petro
                                                Ihab L. Salib
                                                Roberto Sanchez-Dahl, Sr.
                                                John Sidawi
                                                Michael W. Sirianni, Jr.
                                                Christopher Smith
                                                Timothy G. Trebilcock
                                                Paolo H. Valle
                                                Stephen J. Wagner
                                                Paige M. Wilhelm
                                                George B. Wright

Assistant Vice Presidents:                      Lori Andrews
                                                Hanan Callas
                                                Jerome Conner
                                                James R. Crea, Jr.
                                                Karol M. Crummie
                                                Richard Cumberledge
                                                Richard J. Gallo
                                                Kathyrn P. Glass
                                                James Grant
                                                Tracey L. Lusk
                                                Ann Manley
                                                Karl Mocharko
                                                Bob Nolte
                                                Rae Ann Rice
                                                Brian Ruffner
                                                Kyle D. Stewart
                                                Mary Ellen Tesla
                                                Nichlas S. Tripodes
                                                Mark Weiss

Secretary:                                      G. Andrew Bonnewell

Treasurer:                                      Thomas R. Donahue

Assistant Secretary:                            Jay S. Neuman


Assistant Treasurer:                            Denis McAuley, III

            The business address of each of the Officers of the investment adviser is
            Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
            15222-3779.  These individuals are also officers of a majority of the
            investment advisers to the investment companies in the Federated Fund
            Complex described in Part B of this Registration Statement.


Item 26.    Principal Underwriters:

            (a)   Federated  Securities  Corp. the Distributor for shares of the
                  Registrant,  acts as principal  underwriter  for the following
                  open-end investment companies, including the Registrant:

                  Cash  Trust  Series,  Inc.;  Cash Trust  Series II;  Federated
                  Adjustable Rate Securities  Fund;  Federated  American Leaders
                  Fund,  Inc.;  Federated  Core Trust;  Federated Core Trust II,
                  L.P.;  Federated  Equity Funds;  Federated Equity Income Fund,
                  Inc.; Federated Fixed Income Securities,  Inc.; Federated GNMA
                  Trust;   Federated   Government   Income   Securities,   Inc.;
                  Federated  High Income Bond Fund,  Inc.;  Federated High Yield
                  Municipal Income Fund;  Federated High Yield Trust;  Federated
                  Income  Securities  Trust;  Federated Income Trust;  Federated
                  Index  Trust;   Federated   Institutional   Trust;   Federated
                  Insurance  Series;   Federated   International  Series,  Inc.;
                  Federated  Investment  Series Funds,  Inc.;  Federated Limited
                  Duration  Government Fund, Inc.;  Federated Managed Allocation
                  Portfolios;  Federated  Municipal High Yield  Advantage  Fund,
                  Inc.;  Federated  Municipal  Securities Fund, Inc.;  Federated
                  Municipal   Securities   Income   Trust;   Federated   Premier
                  Intermediate   Municipal   Income  Fund;   Federated   Premier
                  Municipal Income Fund;  Federated  Short-Term Municipal Trust;
                  Federated  Stock and Bond Fund,  Inc.;  Federated Stock Trust;
                  Federated Total Return  Government Bond Fund;  Federated Total
                  Return  Series,  Inc.;  Federated U.S.  Government  Bond Fund;
                  Federated  U.S.   Government   Securities   Fund:  1-3  Years;
                  Federated  U.S.   Government   Securities   Fund:  2-5  Years;
                  Federated  World   Investment   Series,   Inc.;   Intermediate
                  Municipal Trust;  Edward Jones Money Market Fund; Money Market
                  Obligations  Trust;  Regions  Morgan  Keegan  Select Funds and
                  SouthTrust Funds.


         (b)

         (1)                        (2)                        (3)
Positions and Offices                                 Positions and Offices
  With Distributor                  Name                 With Registrant
_____________________         _________________       ______________________

Chairman:                     Richard B. Fisher       Vice President

President-Institutional
Sales and Director:           John B. Fisher

Executive Vice
Vice President, Assistant
Secretary and Director:       Thomas R. Donahue

President-Broker/Dealer
And Director:                 James F. Getz

Vice President, Assistant
Secretary and Director:       Peter J. Germain

Treasurer and Director:       Denis McAuley III

Senior Vice Presidents:       Mark W. Bloss
                              Richard W. Boyd
                              Laura M. Deger
                              Peter W. Eisenbrandt
                              Theodore Fadool, Jr.
                              Christopher Fives
                              James S. Hamilton
                              James M. Heaton
                              H. Joseph Kennedy
                              Amy Michaliszyn
                              Keith Nixon
                              Solon A. Person, IV
                              Ronald M. Petnuch
                              Thomas E. Territ
                              Robert F. Tousignant
                              Paul Uhlman

Vice Presidents:              Irving Anderson
                              Dan Berry
                              John B. Bohnet
                              Edward R. Bozek
                              Jane E. Broeren-Lambesis
                              Brian Burke
                              Craig Burness
                              David J. Callahan
                              Mark Carroll
                              Dan Casey
                              Scott Charlton
                              Steven R. Cohen
                              Mary J. Combs
                              James Conely
                              R. Edmond Connell, Jr.
                              Kevin J. Crenny
                              G. Michael Cullen
                              Beth C. Dell
                              Robert J. Deuberry
                              Ron Dorman
                              William C. Doyle
                              Donald C. Edwards
                              Lee England
                              Timothy Franklin
                              Jamie Getz
                              Joseph D. Gibbons
                              J. Todd Glickson
                              G. Tad Gullickson
                              Scott Gundersen
                              Dayna C. Haferkamp
                              Raymond J. Hanley
                              Vincent L. Harper, Jr.
                              Bruce E. Hastings
                              Teresa M. Johnson
                              Christopher L. Johnston
                              William Kastrol
                              Stephen Kittel
                              Michael W. Koenig
                              Ed Koontz
                              Theodore J. Kravits, Jr.
                              Christopher A. Layton
                              Michael H. Liss
                              Michael R. Manning
                              Martin J. McCaffrey
                              Mary A. McCaffrey
                              Richard C. Mihm
                              Chris Milliken
                              Vincent T. Morrow
                              Alec H. Neilly
                              Rebecca Nelson
                              James E. Ostrowski
                              Thomas A. Peter III
                              Raleigh Peters
                              Robert F. Phillips
                              Josh Rasmussen
                              Richard A. Recker
                              Christopher Renwick
                              Diane M. Robinson
                              Brian S. Ronayne
                              Timothy A. Rosewicz
                              Thomas S. Schinabeck
                              Edward J. Segura
                              Peter Siconolfi
                              Edward L. Smith
                              John A. Staley
                              Colin B. Starks
                              Jeffrey A. Stewart
                              Kevin Stutz
                              William C. Tustin
                              G. Walter Whalen
                              Stephen White
                              Patrick M. Wiethorn
                              Edward J. Wojnarowski
                              Michael P. Wolff


Assistant Vice Presidents:    Lisa A. Toma
                              Robert W. Bauman
                              Charles L. Davis, Jr.
                              Brian F. Palusa
                              William Rose

Secretary:                    Stephen A. Keen

Assistant Secretary:          Thomas R. Donahue
                              Peter J. Germain

The business address of each of the Officers of Federated Securities Corp. is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779.

         (c)     Not applicable




Item 27.    Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant                                Reed Smith LLP
                                          Investment Management         Group
(IMG)
                                          Federated Investors Tower
                                          12th Floor
                                          1001 Liberty Avenue
                                          Pittsburgh, PA  15222-3779
                                          (Notices should be sent       to the
Agent for Service                         at above address)

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

State Street Bank and
Trust Company                             P.O. Box 8600
("Custodian, Transfer Agent               Boston, MA  02266-8600
and Dividend Disbursing
Agent")



Federated Services Company                Federated Investors Tower
("Administrator")                         1001 Liberty Avenue
                                          Pittsburgh, PA  15222-3779

Federated Investment Management           Federated Investors Tower
   Company                                1001 Liberty Avenue
("Adviser")                               Pittsburgh, PA  15222-3779



Item 28.    Management Services:  Not applicable.

Item 29.    Undertakings:

            Registrant hereby undertakes, if requested to do so by the holders
            of at least 10% of the registrant's outstanding shares, to call a
            meeting of shareholders for the purpose of voting upon the
            question of removal of a Director or Directors and to assist in
            communications with other shareholders as required by Section
            16(c).

                                   SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED INVESTMENT SERIES
FUNDS, INC., certifies that it meets all of the requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania,
on the 31st day January,
2005.
                    FEDERATED INVESTMENT SERIES FUNDS, INC.

            BY: /s/ Andrew P. Cross
            Andrew P. Cross, Assistant Secretary
            January 31, 2005

      Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
person in the capacity and on the date indicated:

      NAME                         TITLE                    DATE

By:   /s/ Andrew P. Cross
Andrew P. Cross               Attorney In Fact        January 31, 2005
ASSISTANT SECRETARY           For the Persons
                              Listed Below

      NAME                         TITLE

John F. Donahue*                 Chairman and Director

J. Christopher Donahue*          President and Director
                                 (Principal Executive Officer)

Richard J. Thomas*               Treasurer
                                 (Principal Financial Officer)

William D. Dawson, III*          Chief Investment Officer

Thomas G. Bigley*                Director

John T. Conroy, Jr.*             Director

Nicholas P. Constantakis*        Director

John F. Cunningham*              Director

Lawrence D. Ellis, M.D.*         Director

Peter E. Madden*                 Director

Charles F. Mansfield, Jr.*       Director

John E. Murray, Jr.*             Director

Marjorie P. Smuts*               Director

John S. Walsh*                   Director

*  By Power of Attorney