[LOGO] FEDERATED INVESTORS
Since 1955
Federated
International
Equity Fund
13th Annual Report
November 30, 1996
Established 1984
GROWTH
President's Message
[PHOTO APPEARS HERE]
Dear Shareholder:
Federated International Equity Fund was established in 1984, and I am pleased to
present the 13th Annual Report for the fund, which covers the period from
December 1, 1995 to November 30, 1996. This international stock fund is designed
for capital appreciation.* The fund's net assets of $197 million are invested in
31 countries on 4 continents across 230 securities. Japan and the United Kingdom
were the two largest commitments made by the fund's manager.
This report begins with an interview with the portfolio manager, Drew Collins,
Senior Vice President, Federated Global Research Corp. Following his discussion
are three additional items of shareholder interest: a series of graphs showing
long-term investment performance, a complete listing of the fund's diversified
international stock holdings, and the fund's financial statements.
In 1996, the international stock market and Federated International Equity Fund
turned in positive performances after a very weak 1995. As Drew relates, a weak
Japanese market which makes up a large percentage of the international
-
arena held down returns overall. A review of fund performance for each share
-
class as of November 30, 1996 is shown below.**
<TABLE>
<CAPTION>
Capital Gain
Distributions Total Return
<S> <C> <C>
Class A Shares $1.89 8.63%
Class B Shares $1.89 7.59%
Class C Shares $1.89 7.75%
</TABLE>
Thank you for joining the growing number of Federated International Equity Fund
shareholders who have diversified their equity assets internationally and
entrusted this fund with more than $197 million.
I recommend that shareholders add to their investment accounts on a regular
basis to take advantage of price fluctuations thus using the dollar-cost
averaging method of investing.***
As always, we welcome your comments and suggestions.
Sincerely,
Glen R. Johnson
President
January 15, 1997
* International investing can involve additional risks, including currency
risk, increased volatility of foreign securities and differences in
auditing and other financial standards.
** Performance quoted is based on net asset value, represents past performance
and is not indicative of future results. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns for the period,
based on offering price, for Class A Shares, Class B Shares, and Class C
Shares were 2.66%, 1.65%, and 6.66%, respectively.
*** Dollar-cost averaging does not ensure a profit or protect against loss in
declining markets. Since such a plan of investing involves continuous
investing regardless of fluctuating price levels, investors should
consider whether to continue to invest in periods of low price levels.
Investment Review
[PHOTO APPEARS HERE]
Drew Collins
Senior Vice President
Federated Global
Research Corp.
Q. While the U.S. stock market seemed to defy gravity in 1996, international
stocks overall experienced a less spectacular year as they continued to recover
from a very difficult 1995. What factors contributed to the performance of the
international equity market?
A. Once again, a major feature of the investment returns in the international
markets was that of Japan. Although the Japanese equity market managed a modest
gain over the course of the past year, this gain was more than offset by the
falling Japanese Yen, which depreciated by 12.1% over the 12-month period ending
November 30, 1996. In U.S. dollar terms, the Japanese market fell by 4.6%
(including net dividends) as measured by the Morgan Stanley Capital
International Europe, Australia, Far-East Index ("EAFE Index").*
Q. How did Federated International Equity Fund perform during the 12-month
period compared to its benchmark, and what strategies influenced the fund's
return?
A. Federated International Equity Fund produced a 12-month total return of
8.63% for Class A Shares based on net asset value.** The total returns for Class
B Shares and Class C Shares based on net asset value were 7.59% and 7.75%,
respectively.** The return of the EAFE Index was 11.76% for the same period.*
The source of this underperformance was an underweight in the European markets,
which were among the better performing markets for the period. The fund remained
underweighted in the Japanese market throughout the period, but this was
insufficient to offset the strong gains in Europe. In Southeast Asia, strong
gains and an overweight position in Hong Kong were offset by weak returns
elsewhere in Asia. Latin America was one of the highlights of the year, making a
positive contribution to performance.
* The Morgan Stanley Capital International Europe, Australia, and Far East
Index is a market capitalization weighted foreign securities index, which
is widely used to measure the performance of European, Australian, New
Zealand and Far Eastern stock markets. The index covers approximately 1,020
companies drawn from 18 countries in the above regions. The index values its
securities daily in both U.S. dollars and local currency and calculated
total returns monthly. This index is unmanaged, and investments cannot be
made in an index.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. Total returns for the period, based on offering price,
for Class A Shares, Class B Shares, and Class C Shares were 2.66%, 1.65%,
and 6.66%, respectively.
Q. How were the fund's assets weighted among key regions?
A. Approximately 25% of the fund's assets were concentrated in Japan and 20% in
the United Kingdom. The balance was spread across 29 other countries. Country
weightings and the top holdings as of November 30, 1996 were:
<TABLE>
<CAPTION>
Country % of net assets Largest holding % of net assets
<S> <C> <C> <C>
Japan 24.7% Konami Co. 1.39%
United Kingdom 20.5% EMI Group PLC 0.76%
France 7.2% LVMH (Moet Hennessy) 0.86%
Hong Kong 6.9% Sun Hung Kai Properties 0.83%
Germany 6.9% Siemens AG 0.73%
Switzerland 5.1% Ciba-Giegy AG-Registered 0.76%
Malaysia 2.6% Malaysian Ind. Devel. 0.62%
Singapore 2.5% United Overseas Bank Ltd. (FS) 0.54%
Netherlands 2.4% Wolters Kluwer NV 0.60%
Australia 2.1% Lend Lease Corp. Ltd. 0.64%
Other Countries 19.1%
</TABLE>
Q. Turning to Japan, what is your outlook there as well as the rest of the
international markets as we enter 1997?
A. The weakness of the Yen over the past year has masked a resurgence that has
taken place in the competitiveness and profitability of Japanese companies.
Export-oriented companies and manufacturers such as Sony and Fuji Photo Film are
enjoying improved margins and are regaining market share. Japanese automotive
manufacturers such as Toyota Motors have regained roughly three percentage
points of market share in the U.S. over a year ago, and other industries such as
electronics and semiconductors are enjoying similar gains. We continue to
believe that there are excellent opportunities in the Japanese market in the
year ahead.
Europe, which has had a strong run over the past 12 months along with the U.S.
market, is looking more fully valued today than a year ago. We still like the
outlook for many European companies such as Wolters Kluwer and Pearson, but the
valuation lift that the European markets as a whole have been given over the
past year mainly has been a function of lower interest rates. This interest rate
decline should begin to bottom over the next year, as economic activity picks
up. Recent interest rate increases in the United Kingdom should eventually be
followed on the continent.
In Asia, the markets will be anticipating the handover of control of Hong Kong
to the People's Republic of China at the end of June 1997. We remain optimistic
as to the implications for Hong Kong equities and are overweighted in the
market. Two securities we own here are Hutchison Whampoa and Peregrine
Investments. Elsewhere in Asia, we are still finding some attractive valuations
in companies such as BankNegara Indonesia.
Latin America is another area we would highlight for growth in 1997, and the
Federated International Equity Fund wound up the fiscal year with just over 6%
of its assets invested in this region. Banco Frances and Chilectra are two
companies we currently own. Economic recoveries are taking place in Mexico and
Argentina, as well as a continued expansion in Brazil. We own Telefonica de
Argentinas and YPF in Argentina and Petrobras in Brazil.
Q. With approximately 25% of the fund invested in Japan at year-end, are you
concerned about the weakness in the Japanese Yen negatively impacting the
performance of the fund in 1997?
A. With the sharp depreciation of the Yen over the past year, the currency is
now at levels that make Japanese exporters and manufacturers competitive again.
Therefore, the downward pressure we have seen on the currency over the year
should be alleviated in the months ahead. Moreover, the companies in which we
are investing in the fund are attractively valued by historical standards and,
in our opinion, should perform well in this environment showing significantly
improved profitability.
Q. The international markets have trailed the U.S. market in the 1990s thus
far. Will 1997 be the year of the turnaround?
A. With the U.S. market at historically high valuation levels, especially on
the basis of price/book value and dividend yield, many of the markets abroad are
trading well below their peak valuation. Over time, we would expect this
disparity to narrow, and the next 12 months may see the beginning of this
process. Furthermore, as the leading investment banking firms in the world study
corporations for their clients' accounts, they are comparing U.S. and
international industry sectors to select the best corporations for investment.
For example, a sophisticated individual and a pension or union fund are all more
aware than ever that international corporations can compete with the best U.S.
corporations, i.e., British Petroleum and Exxon, Royal Dutch and Enron.
Two Ways You May Seek to Invest for Success in
Federated International Equity Fund
Initial Investment:
If you had made an initial investment of $13,000 in the Class A Shares of
Federated International Equity Fund on 8/17/84, reinvested dividends and capital
gains, and didn't redeem any shares, your account would have been worth $55,490
on 11/30/96. You would have earned a 12.53%* average annual total return for the
12-year investment life span.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends, and
you gain the benefit of compounding.
As of 12/31/96, the Class A Shares' average annual one-year, five-year and
ten-year total returns were -0.06%, 5.74%, and 5.76%, respectively. Class B
Shares' average annual one year and since inception (9/28/94) total returns were
- -0.87% and -0.44% respectively. Class C Shares' average annual one-year and
since inception (4/1/93) total returns were 3.94% and 8.22%, respectively.
GRAPHIC PRESENTATION `A1'' OMITTED - SEE APPENDIX.
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 5.50%
sales charge applicable to an initial investment in Class A Shares.
Data quoted represent past performance and do not guarantee future results.
Investment return and principal value will fluctuate so an investor's shares,
when redeemed, may be worth more or less than their original cost.
Federated International Equity Fund
Investing One Step at a Time:
$1,000 invested each year for 13 years (reinvesting all dividends and capital
gains) grew to $22,226.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Federated
International Equity Fund on 8/17/84, reinvested your dividends and capital
gains and didn't redeem any shares, you would have invested only $13,000, but
your account would have reached a total value of $22,226* by 11/30/96. You would
have earned an average annual total return of 8.16%.
A practical investment plan helps you pursue long-term capital growth through a
diversified portfolio primarily invested in equity securities of non-U.S.
issuers. Through systematic investing, you buy shares on a regular basis and
reinvest all earnings. An investment plan works for you when you invest only
$1,000 annually. You can take it one step at a time. Put time, money and
compounding to work!
GRAPHIC PRESENTATION `A2'' OMITTED - SEE APPENDIX.
* No method of investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing price
levels, the investor should consider whether or not to continue purchases
through periods of low price levels.
Federated International Equity Fund
-
Hypothetical Investor Profile: Investing for Long-Term Growth
Dan and Gigi Hardwick are a two-income suburban couple who, like many others,
want to be able to afford their present lifestyle after they retire.
They decided an international stock fund, though possibly volatile in the
short-term, offered excellent opportunities for long-term growth. They invested
$10,000 in Federated International Equity Fund on 8/17/84 and to take advantage
-
of dollar cost averaging have invested $5,000 every August since.
-
By 11/30/96, they were pleased to see that their $70,000 investment had grown to
$133,164 for an average annual total return of 9.11%.* Gigi's already picturing
a long Mediterranean cruise to celebrate their retirement.
The couple is fictional, but the figures are real.
GRAPHIC PRESENTATION `A3'' OMITTED - SEE APPENDIX.
* This hypothetical scenario is provided for illustrative purposes only and does
not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
Federated International Equity Fund
-
Portfolio Update
GRAPHIC PRESENTATION `A4'' OMITTED - SEE APPENDIX.
Federated International Equity Fund (Class A Shares)
Growth of $10,000 Invested in
Federated International Equity Fund
(Class A Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Equity Fund (Class A Shares) (the "Fund") from November
30, 1986 to November 30, 1996 compared to the Morgan Stanley Capital
International Europe Australia Far-East Index (EAFE).+
GRAPHIC PRESENTATION `A5'' OMITTED - SEE APPENDIX.
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund with no sales
charge. As of October 1, 1994, the maximum sales charge is 5.50%. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The EAFE has been adjusted to reflect reinvestment of dividends on
securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The EAFE is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
Federated International Equity Fund (Class B Shares)
Growth of $10,000 Invested in
Federated International Equity Fund
(Class B Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Equity Fund (Class B Shares) (the "Fund") from
September 28, 1994 (start of performance) to November 30, 1996 compared to the
Morgan Stanley Capital International Europe Australia Far-East Index (EAFE).+
GRAPHIC PRESENTATION `A6'' OMITTED - SEE APPENDIX.
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 4.00% contingent deferred sales charge on any
redemption less than three years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the reinvestment
of all dividends and distributions. The EAFE has been adjusted to reflect
reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The EAFE is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
Federated International Equity Fund (Class C Shares)
Growth of $10,000 Invested in
Federated International Equity Fund
(Class C Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Equity Fund (Class C Shares) (the "Fund") from April 1,
1993 (start of performance) to November 30, 1996 compared to the Morgan Stanley
Capital International Europe Australia Far-East Index (EAFE).+
GRAPHIC PRESENTATION `A7'' OMITTED - SEE APPENDIX.
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less than
one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The EAFE has been adjusted
to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The EAFE is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
Federated International Equity Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
November 30, 1996
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--96.9%
- ---------------------------------------------------------------------------------------------
ARGENTINA--0.6%
-----------------------------------------------------------------------------
12,015 Banco Frances del Rio de la Plata S.A., ADR $ 363,454
-----------------------------------------------------------------------------
40,229 Compania Naviera Perez Companc S.A., Class B 275,277
-----------------------------------------------------------------------------
7,744 (a)IRSA Inversiones y Representaciones S.A., GDR 240,064
-----------------------------------------------------------------------------
10,900 Telefonica de Argentina S.A., ADR 277,950
-----------------------------------------------------------------------------
9,800 YPF Sociedad Anonima, ADR 227,850
----------------------------------------------------------------------------- ---------------
Total 1,384,595
----------------------------------------------------------------------------- ---------------
AUSTRALIA--1.6%
-----------------------------------------------------------------------------
105,000 (b)Commonwealth Installment Receipt Trustee Ltd. 663,194
-----------------------------------------------------------------------------
195,000 Darling Park Trust 158,717
-----------------------------------------------------------------------------
68,500 Lend Lease Corp., Ltd. 1,271,203
-----------------------------------------------------------------------------
7,000 (a)Orogen Minerals Ltd., GDR 140,910
-----------------------------------------------------------------------------
130,000 Woodside Petroleum Ltd. 913,153
----------------------------------------------------------------------------- ---------------
Total 3,147,177
----------------------------------------------------------------------------- ---------------
AUSTRIA--0.2%
-----------------------------------------------------------------------------
3,400 Vae Eisenbahnsyst 314,189
----------------------------------------------------------------------------- ---------------
BRAZIL--0.6%
-----------------------------------------------------------------------------
36,700 (a)(b)Elevadores Atlas 394,356
-----------------------------------------------------------------------------
1,338,000 (a)Light Participacoes S.A. 251,409
-----------------------------------------------------------------------------
8,195 Telecomunicacoes Brasileras, ADR 620,771
----------------------------------------------------------------------------- ---------------
Total 1,266,536
----------------------------------------------------------------------------- ---------------
CANADA--0.1%
-----------------------------------------------------------------------------
18,000 Ontario Stores Inc 173,513
----------------------------------------------------------------------------- ---------------
CHILE--0.5%
-----------------------------------------------------------------------------
9,000 (a)Banco BHIF, ADR 151,875
-----------------------------------------------------------------------------
8,000 (a)Banco de A. Edwards, ADR 148,000
-----------------------------------------------------------------------------
3,100 (a)(b) Chilectra S.A., ADR 170,500
-----------------------------------------------------------------------------
2,000 Compania Telecomunicacion Chile, ADR $ 190,250
-----------------------------------------------------------------------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
CHILE--CONTINUED
-----------------------------------------------------------------------------
6,900 (a)Santa Isabel S.A., ADR 173,363
-----------------------------------------------------------------------------
3,200 Sociedad Quimica Y Minera De Chile, ADR 166,400
----------------------------------------------------------------------------- ---------------
Total 1,000,388
----------------------------------------------------------------------------- ---------------
COLOMBIA--0.3%
-----------------------------------------------------------------------------
15,500 Banco Ganadero S.A., ADR 383,625
-----------------------------------------------------------------------------
17,000 Banco Industrial Colombiano, ADR 274,125
----------------------------------------------------------------------------- ---------------
Total 657,750
----------------------------------------------------------------------------- ---------------
DENMARK--0.1%
-----------------------------------------------------------------------------
4,000 (a)(b)Inwear Group AS 181,223
----------------------------------------------------------------------------- ---------------
EGYPT--0.1%
-----------------------------------------------------------------------------
10,500 (a)(b)Suez Cement Co., GDR 168,525
----------------------------------------------------------------------------- ---------------
FRANCE--7.2%
-----------------------------------------------------------------------------
17,046 AXA 1,024,300
-----------------------------------------------------------------------------
8,300 Accor S.A. 1,064,551
-----------------------------------------------------------------------------
12,600 Compagnie Financiere de Paribas, Class A 865,680
-----------------------------------------------------------------------------
7,600 Compagnie de St. Gobain 1,092,615
-----------------------------------------------------------------------------
16,400 Credit Commerical De France 794,288
-----------------------------------------------------------------------------
12,000 Credit Local de France 1,086,336
-----------------------------------------------------------------------------
18,200 Etablissements Economiques du Casino Guichard-Perrachon 823,979
-----------------------------------------------------------------------------
7,000 Group Danon 1,030,476
-----------------------------------------------------------------------------
7,000 Havas S.A. 495,808
-----------------------------------------------------------------------------
6,700 LVMH (Moet-Hennessy) 1,698,151
-----------------------------------------------------------------------------
22,900 Lafarge-Coppee 1,446,648
-----------------------------------------------------------------------------
8,200 Peugeot S.A. 1,007,772
-----------------------------------------------------------------------------
20,372 Schneider S.A. 969,111
-----------------------------------------------------------------------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
FRANCE--CONTINUED
-----------------------------------------------------------------------------
10,633 Total SA-B $ 850,225
----------------------------------------------------------------------------- ---------------
Total 14,249,940
----------------------------------------------------------------------------- ---------------
GERMANY--6.4%
-----------------------------------------------------------------------------
32,000 BASF AG 1,183,590
-----------------------------------------------------------------------------
30,000 Bayer AG 1,207,139
-----------------------------------------------------------------------------
49,500 (a)Commerzbank AG, Frankfurt 1,216,501
-----------------------------------------------------------------------------
20,000 Daimler Benz AG 1,306,157
-----------------------------------------------------------------------------
21,400 Deutsche Bank, AG 1,019,843
-----------------------------------------------------------------------------
5,000 (a)Henkel KGAA 243,807
-----------------------------------------------------------------------------
2,200 Linde AG 1,335,934
-----------------------------------------------------------------------------
2,800 Mannesmann AG 1,167,804
-----------------------------------------------------------------------------
17,700 Schwarz Pharma AG 1,317,632
-----------------------------------------------------------------------------
30,000 Siemens AG 1,445,290
-----------------------------------------------------------------------------
19,700 Veba AG 1,152,080
----------------------------------------------------------------------------- ---------------
Total 12,595,777
----------------------------------------------------------------------------- ---------------
HONG KONG--6.9%
-----------------------------------------------------------------------------
2,070,000 Aeon Credit Service 696,068
-----------------------------------------------------------------------------
1,119,000 Amoy Properties Ltd. 1,563,011
-----------------------------------------------------------------------------
363,000 (a)Cheung Kong 882,618
-----------------------------------------------------------------------------
87,000 Cheung Kong 765,132
-----------------------------------------------------------------------------
152,600 (a)(b)China Resources Bejing Land 94,734
-----------------------------------------------------------------------------
71,014 HSBC Holdings PLC 1,478,693
-----------------------------------------------------------------------------
1,159,000 Henderson Investment Ltd. 1,409,027
-----------------------------------------------------------------------------
388,000 Hong Kong Telecom 672,426
-----------------------------------------------------------------------------
146,000 Hutchison Whampoa 1,128,233
-----------------------------------------------------------------------------
123,000 New World Development Co. Ltd. 831,189
-----------------------------------------------------------------------------
1,414,000 Oriental Press Group 795,512
-----------------------------------------------------------------------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
HONG KONG--CONTINUED
-----------------------------------------------------------------------------
600,000 Peregrine Investment $ 1,109,674
-----------------------------------------------------------------------------
132,000 Sun Hung Kai Properties 1,638,903
-----------------------------------------------------------------------------
549,500 (a)Winsor Property Holdings Ltd. 827,946
----------------------------------------------------------------------------- ---------------
Total 13,893,166
----------------------------------------------------------------------------- ---------------
INDIA--1.1%
-----------------------------------------------------------------------------
73,200 (a)(b)Crompton Greaves Ltd., GDR 237,900
-----------------------------------------------------------------------------
30,000 (a)Hindalco Industries Ltd., GDR 612,000
-----------------------------------------------------------------------------
40,000 (a)(b)Larsen & Toubro Ltd., GDR 580,000
-----------------------------------------------------------------------------
63,800 (a)(b)Mahindra and Mahindra, GDR 669,900
-----------------------------------------------------------------------------
34,200 (a)(b)Steel Authority of India, GDR 290,700
----------------------------------------------------------------------------- ---------------
Total 2,390,500
----------------------------------------------------------------------------- ---------------
INDONESIA--1.4%
-----------------------------------------------------------------------------
552,500 (a)Bank Negara Indonesia 276,839
-----------------------------------------------------------------------------
360,000 Citra Marga Nusaphala Persada 303,198
-----------------------------------------------------------------------------
95,500 Gudang Garam 406,231
-----------------------------------------------------------------------------
168,000 Modern Photo Film Co. 420,896
-----------------------------------------------------------------------------
112,000 Semen Gresik 341,493
-----------------------------------------------------------------------------
360,667 Steady Safe 422,957
-----------------------------------------------------------------------------
409,060 Pab K Tjiwi Kimia 392,488
-----------------------------------------------------------------------------
170,000 Tambang Timah 268,230
----------------------------------------------------------------------------- ---------------
Total 2,832,332
----------------------------------------------------------------------------- ---------------
ISRAEL--0.1%
-----------------------------------------------------------------------------
8,100 (a)Memco Software, Ltd. 154,913
----------------------------------------------------------------------------- ---------------
ITALY--2.6%
-----------------------------------------------------------------------------
150,000 Bca Pop Di Milano 766,846
-----------------------------------------------------------------------------
128,000 Burgo (Cartiere) SPA 612,157
-----------------------------------------------------------------------------
171,000 Eni SPA 900,148
-----------------------------------------------------------------------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
ITALY--CONTINUED
-----------------------------------------------------------------------------
96,000 Imi $ 806,465
-----------------------------------------------------------------------------
5,000 (a)La Rinascente SPA, Warrants 2,342
-----------------------------------------------------------------------------
500,000 Telecom Italia Mobile 1,175,830
-----------------------------------------------------------------------------
103,000 (a)Unicem SPA 695,069
----------------------------------------------------------------------------- ---------------
Total 4,958,857
----------------------------------------------------------------------------- ---------------
JAPAN--23.6%
-----------------------------------------------------------------------------
175,000 Amada Co. 1,462,687
-----------------------------------------------------------------------------
3,200 Asahi Broadcasting Corp. 351,185
-----------------------------------------------------------------------------
40,000 Canare Electric Co. Ltd. 842,845
-----------------------------------------------------------------------------
232,000 Casio Computer Co. 1,882,072
-----------------------------------------------------------------------------
250 DDI Corp. 1,788,850
-----------------------------------------------------------------------------
113,000 Dai Nippon Printing Co. Ltd. 2,063,565
-----------------------------------------------------------------------------
145,200 Daito Trust Construction 1,899,456
-----------------------------------------------------------------------------
62,000 Fuji Photo Film 1,943,284
-----------------------------------------------------------------------------
100,000 Hitachi Maxell 2,063,213
-----------------------------------------------------------------------------
175,000 JGC Corp. 1,613,257
-----------------------------------------------------------------------------
4,000 Japan Cash Machine Co. Ltd. 71,291
-----------------------------------------------------------------------------
85,000 Japan Radio Co. 1,037,313
-----------------------------------------------------------------------------
270 (b)Japan Tobacco Inc 1,922,476
-----------------------------------------------------------------------------
80,000 Konami Co. 2,732,221
-----------------------------------------------------------------------------
12,000 (a)Meiwa Estate 349,781
-----------------------------------------------------------------------------
250,000 Minolta Co. 1,573,749
-----------------------------------------------------------------------------
250,000 Mitsubishi Heavy Industries Ltd. 2,041,264
-----------------------------------------------------------------------------
25,000 Nintendo Corp. Ltd. 1,766,901
-----------------------------------------------------------------------------
80,000 Nippon Comsys Corp. 997,366
-----------------------------------------------------------------------------
82,000 Pioneer Electronic Corp. 1,763,828
-----------------------------------------------------------------------------
30,000 Promise Co. Ltd. 1,501,317
-----------------------------------------------------------------------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
JAPAN--CONTINUED
-----------------------------------------------------------------------------
70,000 Sankyo Co. $ 1,874,451
-----------------------------------------------------------------------------
110,000 Shiseido Co. 1,323,090
-----------------------------------------------------------------------------
80,000 Shochiku Co. 744,513
-----------------------------------------------------------------------------
30,000 Sony Corp. 1,920,105
-----------------------------------------------------------------------------
141,000 Sumitomo Trust & Banking 1,559,789
-----------------------------------------------------------------------------
86,000 Taisho Pharmaceutical Co. 1,917,823
-----------------------------------------------------------------------------
88,000 Takashimaya Co. 1,174,364
-----------------------------------------------------------------------------
165,000 Tokio Marine and Fire Insurance Co. 1,825,285
-----------------------------------------------------------------------------
350,000 (a)Tokyo Tatemono Co., Ltd. 1,604,038
-----------------------------------------------------------------------------
150,000 Tsubakimoto Chain 883,670
----------------------------------------------------------------------------- ---------------
Total 46,495,049
----------------------------------------------------------------------------- ---------------
KOREA--1.1%
-----------------------------------------------------------------------------
10,000 Dongkuk Steel Mill 194,222
-----------------------------------------------------------------------------
7,300 Hankuk Paper Manufacturing Co. 165,559
-----------------------------------------------------------------------------
58,000 Korea Exchange Bank 545,751
-----------------------------------------------------------------------------
84,650 (a)Korea Mobile Telecomm Corp., ADR 1,100,450
-----------------------------------------------------------------------------
50 Samsung Electronics Co. 3,607
-----------------------------------------------------------------------------
166 Samsung Electronics Co. 12,276
-----------------------------------------------------------------------------
4 (a)(b)Samsung Electronics Co., GDR 0
-----------------------------------------------------------------------------
15 (a)(b)Samsung Electronics Co., GDR 754
-----------------------------------------------------------------------------
2,740 Shinhan Bank 48,391
----------------------------------------------------------------------------- ---------------
Total 2,071,010
----------------------------------------------------------------------------- ---------------
MALAYSIA--2.6%
-----------------------------------------------------------------------------
429,000 Eastern and Oriental 933,715
-----------------------------------------------------------------------------
84,000 Malayan Banking 831,025
-----------------------------------------------------------------------------
590,000 Malaysian Industrial Development 1,214,088
-----------------------------------------------------------------------------
222,000 Malaysian Pacific Industries 904,867
-----------------------------------------------------------------------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
MALAYSIA--CONTINUED
-----------------------------------------------------------------------------
192,000 Metacorp $ 592,639
-----------------------------------------------------------------------------
138,000 UMW Holdings 655,322
----------------------------------------------------------------------------- ---------------
Total 5,131,656
----------------------------------------------------------------------------- ---------------
MEXICO--2.1%
-----------------------------------------------------------------------------
16,950 (a)(b)Acer, Inc., ADR 305,100
-----------------------------------------------------------------------------
44,700 (a)Cemex SA, Class B, ADR 322,678
-----------------------------------------------------------------------------
268,000 (a)Cifra SA de C.V., Class B 369,702
-----------------------------------------------------------------------------
28,400 (a)Empresas ICA Sociedad Controladora S.A., ADR 408,250
-----------------------------------------------------------------------------
211,000 Fomento Economico Mexicano, S.A. de C.V., Class B 720,990
-----------------------------------------------------------------------------
205,000 (a)Grupo Corvi S.A., Class UBL 171,548
-----------------------------------------------------------------------------
42,800 (a)(b)Grupo Financiero Bancomer, S.A. de C.V., Class B, ADR 344,797
-----------------------------------------------------------------------------
8,600 Pan American Beverage, Class A 402,050
-----------------------------------------------------------------------------
10,900 Telefonos de Mexico, Class L, ADR 331,088
-----------------------------------------------------------------------------
29,500 (a)Tubos de Acero de Mexico S.A., ADR 401,938
----------------------------------------------------------------------------- ---------------
Total 3,778,141
----------------------------------------------------------------------------- ---------------
NETHERLANDS--2.4%
-----------------------------------------------------------------------------
15,000 ABN-Amro Hldgs N.V. 971,699
-----------------------------------------------------------------------------
22,800 (a)ASM Lithography Holding N.V. 1,003,607
-----------------------------------------------------------------------------
24,000 Boskalis Westminster 476,019
-----------------------------------------------------------------------------
32,300 ING Groep, N.V. 1,131,427
-----------------------------------------------------------------------------
2,400 Koninklijke Frans Maas Groep N.V. 97,152
-----------------------------------------------------------------------------
9,002 Wolters Kluwer N.V. 1,177,261
----------------------------------------------------------------------------- ---------------
Total 4,857,165
----------------------------------------------------------------------------- ---------------
NEW ZEALAND--0.4%
-----------------------------------------------------------------------------
210,000 Air New Zealand Ltd., Class B 552,631
-----------------------------------------------------------------------------
100,000 Fletcher Challenge Building 280,939
----------------------------------------------------------------------------- ---------------
Total 833,570
----------------------------------------------------------------------------- ---------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
NORWAY--0.4%
-----------------------------------------------------------------------------
51,000 (a)Elkem A/S, Class A $ 794,640
----------------------------------------------------------------------------- ---------------
PAKISTAN--0.2%
-----------------------------------------------------------------------------
230,000 Faysal Bank 137,725
-----------------------------------------------------------------------------
12,000 (a)Hub Power Co., GDR 258,000
-----------------------------------------------------------------------------
90,000 (a)PEL Appliances Ltd. 78,593
----------------------------------------------------------------------------- ---------------
Total 474,318
----------------------------------------------------------------------------- ---------------
PHILIPPINES--0.8%
-----------------------------------------------------------------------------
1,700,000 (a)Belle Corp. 452,712
-----------------------------------------------------------------------------
911,552 Davao Union Cement Corp., Class B 298,232
-----------------------------------------------------------------------------
1,344,900 (a)Filinvest Land, Inc. 475,826
-----------------------------------------------------------------------------
30,200 Philippine Commercial International Bank 402,115
----------------------------------------------------------------------------- ---------------
Total 1,628,885
----------------------------------------------------------------------------- ---------------
SINGAPORE--2.5%
-----------------------------------------------------------------------------
172,000 Hong Leong Finance Ltd. 596,021
-----------------------------------------------------------------------------
1,178,300 Roly International Holdings 777,678
-----------------------------------------------------------------------------
144,000 Sembawang Corp. Ltd 780,321
-----------------------------------------------------------------------------
31,000 Singapore Press Holdings Ltd. 585,740
-----------------------------------------------------------------------------
184,000 Straits Steamship Land Ltd. 587,750
-----------------------------------------------------------------------------
69,750 (a)Straits Steamship Land Ltd., Warrants 78,080
-----------------------------------------------------------------------------
100,000 United Overseas Bank Ltd. 1,062,389
-----------------------------------------------------------------------------
220,000 Wing Tai Holdings, Ltd. 602,353
----------------------------------------------------------------------------- ---------------
Total 5,070,332
----------------------------------------------------------------------------- ---------------
SPAIN--3.4%
-----------------------------------------------------------------------------
6,500 (a)ABENGOA S.A. 225,548
-----------------------------------------------------------------------------
13,000 Corp Mapfre S.A. 687,432
-----------------------------------------------------------------------------
14,500 Empresa Nac De Electridad 979,427
-----------------------------------------------------------------------------
10,500 Fomento de Construcciones y Contratas S.A. 887,564
-----------------------------------------------------------------------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
SPAIN--CONTINUED
-----------------------------------------------------------------------------
79,000 Iberdrola S.A. $ 911,726
-----------------------------------------------------------------------------
28,000 Repsol S.A. 1,036,437
-----------------------------------------------------------------------------
42,000 Telefonica de Espana 920,797
-----------------------------------------------------------------------------
8,800 Zardoya-Otis S.A. 937,471
----------------------------------------------------------------------------- ---------------
Total 6,586,402
----------------------------------------------------------------------------- ---------------
SWEDEN--1.1%
-----------------------------------------------------------------------------
25,000 (a)Biacore International AB 397,396
-----------------------------------------------------------------------------
1,750 (a)Scala International AB 153,747
-----------------------------------------------------------------------------
121,000 Stora Kopparbergs, Class A 1,657,633
----------------------------------------------------------------------------- ---------------
Total 2,208,776
----------------------------------------------------------------------------- ---------------
SWITZERLAND--5.1%
-----------------------------------------------------------------------------
740 ABB AG 925,923
-----------------------------------------------------------------------------
9,400 CS Holding AG 1,000,575
-----------------------------------------------------------------------------
1,215 Ciba-Giegy AG 1,503,487
-----------------------------------------------------------------------------
820 Nestle S.A. 890,142
-----------------------------------------------------------------------------
10,000 (a)Oerlikon-Buhrle Holding AG 1,031,837
-----------------------------------------------------------------------------
195 Roche Holding AG 1,498,964
-----------------------------------------------------------------------------
950 Sandoz AG 1,104,872
-----------------------------------------------------------------------------
1,500 Sulzer AG 863,061
-----------------------------------------------------------------------------
3,200 Zurich Versicherungsgesellschaft 908,324
----------------------------------------------------------------------------- ---------------
Total 9,727,185
----------------------------------------------------------------------------- ---------------
THAILAND--0.9%
-----------------------------------------------------------------------------
214,100 Industrial Finance Corporation of Thailand 674,812
-----------------------------------------------------------------------------
78,900 Krung Thai Bank PLC 225,512
-----------------------------------------------------------------------------
34,300 PTT Exploration and Production Public Co. 504,955
-----------------------------------------------------------------------------
380,000 Siam City Bank 446,350
----------------------------------------------------------------------------- ---------------
Total 1,851,629
----------------------------------------------------------------------------- ---------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
UNITED KINGDOM--20.5%
-----------------------------------------------------------------------------
275,000 Asda Group $ 547,873
-----------------------------------------------------------------------------
40,000 (a)Atlantic Telecom Group PLC 82,717
-----------------------------------------------------------------------------
100,000 BAA 823,806
-----------------------------------------------------------------------------
236,000 BTR PLC 948,285
-----------------------------------------------------------------------------
60,766 Barclays PLC 1,045,118
-----------------------------------------------------------------------------
50,724 Boc Group PLC 755,573
-----------------------------------------------------------------------------
80,000 Boots Co. PLC 852,724
-----------------------------------------------------------------------------
54,323 British Aerospace 1,056,691
-----------------------------------------------------------------------------
86,765 British Petroleum Co. PLC 1,003,239
-----------------------------------------------------------------------------
222,495 Bunzl PLC 830,430
-----------------------------------------------------------------------------
85,822 Cadbury Schweppes PLC 738,029
-----------------------------------------------------------------------------
190,000 Caradon PLC 761,853
-----------------------------------------------------------------------------
100,000 Carlton Communications PLC 845,662
-----------------------------------------------------------------------------
70,000 Chubb Security 403,665
-----------------------------------------------------------------------------
103,600 Compass Group 1,056,379
-----------------------------------------------------------------------------
190,000 Cookson Group 721,923
-----------------------------------------------------------------------------
63,500 Cowie Group PLC 422,764
-----------------------------------------------------------------------------
152,757 David S. Smith (Holdings) PLC 810,270
-----------------------------------------------------------------------------
164,550 Delta 1,005,614
-----------------------------------------------------------------------------
64,937 EMI Group PLC 1,500,058
-----------------------------------------------------------------------------
16,500 (a)Eidos PLC 233,020
-----------------------------------------------------------------------------
300,000 FKI PLC 1,086,920
-----------------------------------------------------------------------------
59,400 Gen Accident 731,515
-----------------------------------------------------------------------------
126,000 General Electric Co. PLC 789,089
-----------------------------------------------------------------------------
56,000 Glaxo Wellcome PLC 921,015
-----------------------------------------------------------------------------
114,448 Grand Metropolitan PLC 893,764
-----------------------------------------------------------------------------
158,052 Guardian Royal Ex 712,140
-----------------------------------------------------------------------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
UNITED KINGDOM--CONTINUED
-----------------------------------------------------------------------------
52,000 Imperial Chemical Industries, PLC $ 674,479
-----------------------------------------------------------------------------
180,000 Inchcape PLC 815,568
-----------------------------------------------------------------------------
166,393 Ladbroke Group PLC 573,481
-----------------------------------------------------------------------------
120,000 Marks & Spencer PLC 1,020,847
-----------------------------------------------------------------------------
277,000 Mirror Group PLC 1,071,116
-----------------------------------------------------------------------------
78,500 National Power Co. PLC 608,415
-----------------------------------------------------------------------------
95,000 Pearson 1,173,924
-----------------------------------------------------------------------------
50,000 Peninsular & Oriental Steam Navigation Co. 497,236
-----------------------------------------------------------------------------
65,000 Powergen PLC 633,827
-----------------------------------------------------------------------------
72,000 Premier Farnell PLC 861,870
-----------------------------------------------------------------------------
41,614 RTZ Corp. PLC 699,630
-----------------------------------------------------------------------------
100,000 Rank Group PLC 731,338
-----------------------------------------------------------------------------
85,500 Reckitt & Colman PLC 1,007,658
-----------------------------------------------------------------------------
57,000 Reed International PLC 1,104,447
-----------------------------------------------------------------------------
500,000 Rugby Group PLC 806,994
-----------------------------------------------------------------------------
86,000 Safeway PLC 563,887
-----------------------------------------------------------------------------
330,000 Sedgwick Group PLC 696,284
-----------------------------------------------------------------------------
66,000 Siebe PLC 1,053,581
-----------------------------------------------------------------------------
114,000 Smith, W.H. Group PLC 810,726
-----------------------------------------------------------------------------
66,344 Smithkline Beecham Corp. 914,635
-----------------------------------------------------------------------------
74,000 (a)Thorn PLC 343,376
-----------------------------------------------------------------------------
235,000 Tomkins PLC 981,801
-----------------------------------------------------------------------------
37,000 Zeneca Group 1,020,175
----------------------------------------------------------------------------- ---------------
Total 40,245,431
----------------------------------------------------------------------------- ---------------
TOTAL COMMON STOCKS (IDENTIFIED COST $174,089,837) 191,123,570
----------------------------------------------------------------------------- ---------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT
OR VALUE IN
SHARES U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<S> <S> <C>
CORPORATE BONDS--0.3%
- ---------------------------------------------------------------------------------------------
JAPAN--0.3%
-----------------------------------------------------------------------------
53,000,000 (b)Sumitomo Bank Ltd., Osaka, Conv. Bond, 0.75%, 5/31/2001
(IDENTIFIED COST $486,551) $ 505,454
----------------------------------------------------------------------------- ---------------
PREFERRED STOCKS--3.7%
- ---------------------------------------------------------------------------------------------
AUSTRALIA--0.5%
-----------------------------------------------------------------------------
233,000 News Corp., Ltd., Pfd. 1,024,093
----------------------------------------------------------------------------- ---------------
BRAZIL--1.9%
-----------------------------------------------------------------------------
1,577,000 Banco Itau S.A., Preference 618,282
-----------------------------------------------------------------------------
1,800,000 Centrais Eletricas Brasileiras, Preference, Series B 590,707
-----------------------------------------------------------------------------
29,200 (a)Cofap-Cia Fab Peca, Preference 238,858
-----------------------------------------------------------------------------
4,220,000 (a)Petroleo Brasileiro S.A., Preference 580,097
-----------------------------------------------------------------------------
250,000 Sider Paulista (Cos.) 227,493
-----------------------------------------------------------------------------
3,230,000 (a)Telecomunicacoes de Sao Paulo S.A., Preference 572,207
-----------------------------------------------------------------------------
27,400,000 (a)Uniao de Bancos Brasileir, Pfd. 767,624
-----------------------------------------------------------------------------
247,900,000 (a)Usinas Siderurgicas de Minas Gerais, Pfd. 247,180
----------------------------------------------------------------------------- ---------------
Total 3,842,448
----------------------------------------------------------------------------- ---------------
GERMANY--0.5%
-----------------------------------------------------------------------------
20,000 Henkel KGAA, Pfd. 996,034
----------------------------------------------------------------------------- ---------------
JAPAN--0.8%
-----------------------------------------------------------------------------
27 (b)Sakura Finance (Bermuda), Conv. Pfd. 1,534,466
----------------------------------------------------------------------------- ---------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $6,237,930) 7,397,041
----------------------------------------------------------------------------- ---------------
</TABLE>
Federated International Equity Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- -------------- ----------------------------------------------------------------------------- ---------------
<S> <S> <C>
(C) REPURCHASE AGREEMENT--1.2%
- ---------------------------------------------------------------------------------------------
$ 2,350,000 BT Securities Corporation, 5.72%, dated 11/29/1996, due 12/2/1996 (AT
AMORTIZED COST) $ 2,350,000
----------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST $183,164,318) (D) $ 201,376,065
----------------------------------------------------------------------------- ---------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1996, these securities
amounted to $8,064,079 which represents 4.1% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $183,352,677.
The net unrealized appreciation of investments on a federal tax basis
amounts to $18,023,388 which is comprised of $23,669,649 appreciation and
$5,646,261 depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($197,224,336) at November 30, 1996.
The following acronym(s) are used throughout this portfolio:
ADR--American Depository Receipt
GDR--Global Depository Receipt
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
Federated International Equity Fund
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
November 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $183,164,318 and tax cost $183,352,677) $201,376,065
- ---------------------------------------------------------------------------------------------------
Cash 396,020
- ---------------------------------------------------------------------------------------------------
Cash denominated in foreign currency (identified cost, $4,535) 4,535
- ---------------------------------------------------------------------------------------------------
Income receivable 550,968
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 3,170,635
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 502,108
- --------------------------------------------------------------------------------------------------- -----------
Total assets 206,000,331
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------
Payable for investments purchased $8,243,946
- ----------------------------------------------------------------------------------------
Payable for shares redeemed 277,960
- ----------------------------------------------------------------------------------------
Payable for taxes withheld 35,885
- ----------------------------------------------------------------------------------------
Net payable for foreign exchange contracts 11,278
- ----------------------------------------------------------------------------------------
Accrued expenses 206,926
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 8,775,995
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 11,412,987 shares outstanding $197,224,336
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $174,869,114
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 18,212,892
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 4,166,725
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (24,395)
- --------------------------------------------------------------------------------------------------- -----------
Total net assets $197,224,336
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($172,937,556 / 9,982,601 shares outstanding) $17.32
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/94.50 of $17.32)* $18.33
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share $17.32
- --------------------------------------------------------------------------------------------------- -----------
CLASS B SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($16,707,131 / 980,572 shares outstanding) $17.04
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $17.04
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (94.50/100 of $17.04)** $16.10
- --------------------------------------------------------------------------------------------------- -----------
CLASS C SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($7,579,649 / 449,814 shares outstanding) $16.85
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $16.85
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99/100 of $16.85)** $16.68
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
*See "How to Purchase Shares" in the Prospectus.
**See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Federated International Equity Fund
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended November 30, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $516,589) $ 3,539,771
- ---------------------------------------------------------------------------------------------------
Interest 127,931
- --------------------------------------------------------------------------------------------------- ------------
Total income 3,667,702
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------
Investment advisory fee $ 2,004,435
- --------------------------------------------------------------------------------------
Administrative personnel and services fee 185,000
- --------------------------------------------------------------------------------------
Custodian fees 341,587
- --------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 306,158
- --------------------------------------------------------------------------------------
Directors'/Trustees' fees 6,877
- --------------------------------------------------------------------------------------
Auditing fees 31,106
- --------------------------------------------------------------------------------------
Legal fees 37,825
- --------------------------------------------------------------------------------------
Portfolio accounting fees 91,853
- --------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 92,608
- --------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 58,555
- --------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 450,721
- --------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 30,869
- --------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 19,518
- --------------------------------------------------------------------------------------
Share registration costs 39,419
- --------------------------------------------------------------------------------------
Printing and postage 56,268
- --------------------------------------------------------------------------------------
Insurance premiums 4,788
- --------------------------------------------------------------------------------------
Taxes 60,641
- --------------------------------------------------------------------------------------
Miscellaneous 6,768
- -------------------------------------------------------------------------------------- -----------
Total expenses 3,824,996
- --------------------------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares ($ 274,003)
- --------------------------------------------------------------------------
Waiver of shareholder services fee--Class C Shares (1,101)
- -------------------------------------------------------------------------- ----------
Total waivers (275,104)
- -------------------------------------------------------------------------------------- -----------
Net expenses 3,549,892
- --------------------------------------------------------------------------------------------------- ------------
Net investment income 117,810
- --------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions (net of foreign taxes withheld
of $197,235) 4,131,728
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 11,785,397
- --------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and foreign currency 15,917,125
- --------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 16,034,935
- --------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated International Equity Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------
Net investment income $ 117,810 $ 874,344
- ----------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions ($5,135,689 and $21,531,956 net gains, respectively,
as computed for federal tax purposes) 4,131,728 21,589,545
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments
and translation of assets and liabilities in foreign currency 11,785,397 (20,374,381)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations 16,034,935 2,089,508
- ---------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------
Distributions from net investment income:
- ----------------------------------------------------------------------------------
Class A Shares (919,568) (34,372)
- ----------------------------------------------------------------------------------
Class B Shares (194) --
- ----------------------------------------------------------------------------------
Class C Shares (155) (101)
- ----------------------------------------------------------------------------------
Distributions from net realized gains on investments
and foreign currency transactions
- ----------------------------------------------------------------------------------
Class A Shares (19,980,524) (12,398,817)
- ----------------------------------------------------------------------------------
Class B Shares (726,598) (77,839)
- ----------------------------------------------------------------------------------
Class C Shares (780,198) (431,114)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from distributions to shareholders (22,407,237) (12,942,243)
- ---------------------------------------------------------------------------------- -------------- --------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------------
Proceeds from sale of shares 146,615,463 94,560,822
- ----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 12,142,035 62,363
- ----------------------------------------------------------------------------------
Cost of shares redeemed (160,588,761) (149,570,774)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from share transactions (1,831,263) (54,947,589)
- ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets (8,203,565) (65,800,324)
- ----------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------
Beginning of period 205,427,901 271,228,225
- ---------------------------------------------------------------------------------- -------------- --------------
End of period (including undistributed net investment
income of $0 and $863,049, respectively) $ 197,224,336 $ 205,427,901
- ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated International Equity Fund
Financial Highlights--Class A Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995 1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 17.89 $ 18.53 $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59 $ 17.34
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.03 0.09 0.15 0.06 0.10 0.11 0.19 0.18
- -----------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.38 0.17 1.96 2.53 (0.37) 0.37 (1.16) 1.60
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment operations 1.41 0.26 2.11 2.59 (0.27) 0.48 (0.97) 1.78
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.09) (0.003) (0.07) (0.06) (0.08) (0.21) (0.20) (0.23)
- -----------------------------------
Distributions in excess of net
investment income (a) -- -- -- (0.13) -- -- -- --
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions from net
investment income (0.09) (0.003) (0.07) (0.19) (0.08) (0.21) (0.20) (0.23)
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Distributions from net realized
gain on investments and foreign
currency transactions (1.89) (0.90) -- -- -- (0.11) (2.14) (1.30)
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (1.98) (0.90) (0.07) (0.19) (0.08) (0.32) (2.34) (1.53)
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.32 $ 17.89 $ 18.53 $ 16.49 $ 14.09 $ 14.44 $ 14.28 $ 17.59
- ----------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (B) 8.63% 1.60% 12.82% 18.52% (1.86%) 3.49% (6.72%) 11.55%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 1.68% 1.57% 1.61% 1.60% 1.57% 1.52% 1.32% 1.01%
- -----------------------------------
Net investment income 0.15% 0.42% -- 0.13% 0.69% 0.78% 1.39% 1.04%
- -----------------------------------
Expense waiver/reimbursement (c) 0.15% 0.18% -- 0.01% 0.02% 0.30% 0.25% 0.46%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period
(000 omitted) $172,938 $191,911 $261,178 $192,860 $106,937 $101,980 $82,541 $65,560
- -----------------------------------
Average Commission Rate Paid 0.0018
- -----------------------------------
Portfolio turnover 119% 166% 73% 74% 91% 84% 114% 85%
- -----------------------------------
<CAPTION>
1988 1987
--------- ---------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 19.99 $ 22.87
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.19 0.24
- -----------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.27 (0.72)
- ----------------------------------- --------- ---------
Total from investment operations 3.46 (0.48)
- ----------------------------------- --------- ---------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.23) (0.05)
- -----------------------------------
Distributions in excess of net
investment income (a) -- --
- ----------------------------------- --------- ---------
Total distributions from net
investment income (0.23) (0.05)
- ----------------------------------- --------- ---------
Distributions from net realized
gain on investments and foreign
currency transactions (5.88) (2.35)
- ----------------------------------- --------- ---------
Total distributions (6.11) (2.40)
- ----------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 17.34 19.99
- ----------------------------------- --------- ---------
TOTAL RETURN (B) 24.33% (2.70%)
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 1.00% 1.00%
- -----------------------------------
Net investment income 1.43% 0.93%
- -----------------------------------
Expense waiver/reimbursement (c) 0.28% 0.17%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period
(000 omitted)
- -----------------------------------
Average Commission Rate Paid $68,922 $85,860
- -----------------------------------
Portfolio turnover 98% 130%
- -----------------------------------
</TABLE>
(a) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated International Equity Fund
Financial Highlights--Class B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------
1996 1995 1994(A)
------ ------ -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.70 $18.50 $19.61
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------
Net operating loss (0.03) (0.08) (0.01)
- ----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 1.26 0.18 (1.10)
- ---------------------------------------------------------------------------- --------- --------- ---------
Total from investment operations 1.23 0.10 (1.11)
- ---------------------------------------------------------------------------- --------- --------- ---------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------
Distributions from net investment income (0.00)(b) -- --
- ----------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (1.89) (0.90) --
- ---------------------------------------------------------------------------- --------- --------- ---------
Total distributions (1.89) (0.90) --
- ---------------------------------------------------------------------------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $17.04 $ 17.70 $ 18.50
- ---------------------------------------------------------------------------- --------- --------- ---------
TOTAL RETURN (C) 7.59% 0.68% (5.27%)
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------
Expenses 2.58% 2.52% 2.59%*
- ----------------------------------------------------------------------------
Net investment income (0.74%) (0.52%) (0.88%)*
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $16,707 $6,370 $1,214
- ----------------------------------------------------------------------------
Average Commission Rate Paid $0.0018
- ----------------------------------------------------------------------------
Portfolio turnover 119% 166% 73%
- ----------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 19, 1994 (start of
business) to November 30, 1994.
(b) Distributions from net investment income is less than 0.01 per share.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
Federated International Equity Fund
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------
1996 1995 1994 1993(A)
------ ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.50 $18.30 $16.41 $14.88
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net operating loss (0.10) (0.12) (0.05) (0.04)
- ---------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency 1.34 0.22 1.98 1.57
- --------------------------------------------------------------- --------- --------- --------- ---------
Total from investment operations 1.24 0.10 1.93 1.53
- --------------------------------------------------------------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Distributions from net investment income 0.00(b) (0.00)(b) -- --
- ---------------------------------------------------------------
Distributions in excess of net investment income (c) -- -- (0.04) --
- --------------------------------------------------------------- --------- --------- --------- ---------
Total distributions from net investment income 0.00 (0.00) (0.04) --
- --------------------------------------------------------------- --------- --------- --------- ---------
Distributions from net realized gain on investments
and foreign currency transactions (1.89) (0.90) 0.00 0.00
- --------------------------------------------------------------- --------- --------- --------- ---------
Total distributions (1.89) (0.90) (0.04) 0.00
- --------------------------------------------------------------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $16.85 $ 17.50 $ 18.30 $ 16.41
- --------------------------------------------------------------- --------- --------- --------- ---------
TOTAL RETURN (D) 7.75% 0.69% 11.75% 10.28%
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 2.57% 2.46% 2.55% 2.57%*
- ---------------------------------------------------------------
Net investment income (0.72%) (0.47%) (0.91%) (1.10%)*
- ---------------------------------------------------------------
Expense waiver/reimbursement (e) 0.01% 0.04% 0.00% 0.01%*
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $7,580 $7,146 $8,836 $2,852
- ---------------------------------------------------------------
Average Commission Rate Paid $0.0018
- ---------------------------------------------------------------
Portfolio turnover 119% 166% 73% 74%
- ---------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from March 31, 1993 (start of business)
to November 30, 1993.
(b) Distributions from net investment income is less than 0.01 per share.
(c) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(d) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(e) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated International Equity Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
November 30, 1996
(1) ORGANIZATION
International Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, (the "Act") as an open-end, management
investment company. The Corporation consists of two portfolios. The financial
statements included herein are only those of Federated International Equity Fund
(the "Fund"), a diversified portfolio. The financial statements of the other
portfolio are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held.
The Fund offers three classes of shares: Class A Shares, Class B Shares and
Class C Shares. The Fund's objective is to obtain a total return on its assets.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed corporate bonds, unlisted securities and
private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Foreign
equity securities are valued at the last sale price reported in the market
in which they are primarily traded. If no sale on the recognized exchange
is reported or the security is traded over the counter, the foreign
securities are valued at the mean between the last closing bid and asked
prices. Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term foreign and domestic
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value. The Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available, at
the fair value as determined by the Fund's pricing committee.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions, passive foreign investment companies, and
net operating losses. The following reclassifications have been made to the
financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
<S> <C> <C>
ACCUMULATED NET DISTRIBUTIONS IN EXCESS OF
PAID-IN CAPITAL REALIZED GAINS NET INVESTMENT INCOME
$35,002 $ 50,335 $ (85,337)
</TABLE>
Net investment income, net realized gains, and net assets were not affected
by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding
taxes on foreign interest, dividends, and gains have been provided for in
accordance with the Fund's understanding of the applicable country's tax
rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign currency
contracts for the delayed delivery of securities or foreign currency
exchange transactions. These contracts are used to hedge the Fund against
currency fluctuations. Risks may arise upon entering these transactions
from the potential inability of counterparties to meet the terms of their
commitments and from unanticipated movements in security prices or foreign
exchange rates. The foreign currency transactions are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purpose as unrealized until the settlement
date.
At November 30, 1996, the Fund had outstanding foreign currency commitments
as set forth below:
<TABLE>
<CAPTION>
CONTRACTS TO CONTRACTS AT UNREALIZED
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR VALUE DEPRECIATION
<S> <C> <C> <C> <C>
Contracts Sold:
December 3, 1996 1,558,203 $ 1,096,974 $ 1,108,252 $ 11,278
New Zealand Dollars
</TABLE>
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities
at fiscal year end, resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales.
Additional information on each restricted security held at November 30,
1996 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Commonwealth Installment Receipt Trustee Ltd. 7/15/96 $ 505,017
Elevadores Atlas 9/25/96 395,862
Chilectra S.A. 2/28/96 168,268
Inwear Group AS 11/22/96-11/25/96 163,300
Suez Cement Co., GDR 11/25/96 154,875
China Resources Bejing Land 11/5/96 47,049
Crompton Greaves Ltd., GDR 7/1/96 612,239
Larsen & Toubro Ltd., GDR 6/5/96 796,000
Mahindra and Mahindra, GDR 1/22/96-2/2/96 478,600
Steel Authority of India, GDR 4/22/96-4/23/96 534,492
Japan Tobacco Inc. 6/17/96-8/1/96 2,042,836
Samsung Electronics Co., GDR 3/14/96 0
Acer, Inc., ADR 7/19/96 246,300
Groupo Financiero Bancomer, S.A. de C.V., ADR 11/6/95-1/29/96 205,726
Sumitomo Bank Ltd., Osaka Conv. Bond 6/6/96 486,551
Sakura Finance (Bermuda), Conv. Pfd. 9/12/96 1,468,722
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At November 30, 1996, par value shares ($0.0001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
POUND OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
- ----------------------------------------------------------------------------------
<S> <C>
Class A 500,000,000
- ----------------------------------------------------------------------------------
Class B 500,000,000
- ----------------------------------------------------------------------------------
Class C 500,000,000
- ---------------------------------------------------------------------------------- -----------------
Total 1,500,000,000
- ---------------------------------------------------------------------------------- -----------------
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1996 NOVEMBER 30, 1995
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 7,740,149 $ 131,449,303 4,975,723 $ 86,980,247
- ---------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 679,782 11,012,713 3,695 61,786
- ---------------------------------------------------
Shares redeemed (9,162,907) (155,388,757) (8,351,087) (145,908,457)
- --------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from Class A Share
transactions (742,976) $ (12,926,741) (3,371,669) $ (58,866,424)
- --------------------------------------------------- ----------- -------------- ------------- ---------------
<CAPTION>
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1996 NOVEMBER 30, 1995
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 728,125 $ 12,265,060 320,651 $ 5,616,298
- ---------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 40,410 649,796 -- --
- ---------------------------------------------------
Shares redeemed (147,816) (2,473,361) (26,432) (455,453)
- --------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from Class B Share
transactions 620,719 $ 10,441,495 294,219 $ 5,160,845
- --------------------------------------------------- ----------- -------------- ------------- ---------------
<CAPTION>
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1996 NOVEMBER 30, 1995
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 177,534 $ 2,901,100 114,724 $ 1,964,277
- ---------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 30,197 479,526 32 577
- ---------------------------------------------------
Shares redeemed (166,212) (2,726,643) (189,410) (3,206,864)
- --------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from Class C Share
transactions 41,519 $ 653,983 (74,654) $ (1,242,010)
- --------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from share transactions (80,738) (1,831,263) (3,152,105) (54,947,589)
- --------------------------------------------------- ----------- -------------- ------------- ---------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Global Research Corp., the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to 1.00% of the Fund's average daily net assets.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp., the principal distributor, from the net
assets of the Fund to finance activities intended to result in the sale of the
Fund's Class B Shares and Class C shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule annually, to
compensate Federated Securities Corp.
<TABLE>
<CAPTION>
% OF AVG. DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
- ----------------------------------------------------------------------------------------- -------------------
<S> <C>
Class B Shares 0.75%
- -----------------------------------------------------------------------------------------
Class C Shares 0.75%
- -----------------------------------------------------------------------------------------
</TABLE>
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1996, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 235,723,280
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 248,645,633
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified portfolio, the political or economic developments within a
particular country or region may have an adverse effect on the ability of
domiciled issuers to meet their obligations. Additionally, political or economic
developments may have an effect on the liquidity and volatility of portfolio
securities and currency holdings.
At November 30, 1996, the diversification of industries was as follows:
<TABLE>
<CAPTION>
INDUSTRY % OF NET ASSETS
<S> <C>
Aerospace & Military Technology 0.5
Appliances & Household Durables 0.1
Automobiles 1.8
Banking 10.8
Beverages & Tobacco 1.4
Broadcasting & Publishing 4.1
Building Materials & Components 2.1
Business & Public Services 1.9
Chemicals 2.7
Construction & Housing 2.4
Data Processing & Reproduction 0.3
Electrical & Electronics 5.1
Electronic Components, Instruments 4.0
Energy--Oil & Gas 0.5
Energy Equipment & Services 0.1
Energy Sources 2.7
Financial Services 4.0
Food & Household Products 3.7
Forest Products & Paper 2.3
Health & Personal Care 4.6
Industrial Components 0.5
Insurance 3.3
Leisure & Tourism 2.2
Machinery & Engineering 6.5
Manufacturing 1.5
Merchandising 2.8
Metals--Non Ferrous 1.2
Metals--Steel 0.7
Mining 0.1
Miscellaneous Materials & Commodities 1.4
Multi-Industry 3.1
Pharmaceuticals 1.6
Real Estate 7.0
Recreation, Other Consumer Goods 4.2
Tobacco 1.2
Telecommunications 3.9
Textiles & Apparel 0.1
Transportation--Airlines 0.3
Transportation--Road & Rail 0.7
Transportation--Shipping 0.3
Utilities--Electrical & Gas 2.8
Wholesale & International Trade 0.4
</TABLE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
INTERNATIONAL SERIES, INC.
(Federated International Equity Fund):
We have audited the accompanying statement of assets and liabilities of
Federated International Equity Fund (an investment portfolio of International
Series, Inc., a Maryland corporation), including the schedule of portfolio
investments, as of November 30, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets, and the
financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated International Equity Fund, an investment portfolio of International
Series, Inc., as of November 30, 1996, the results of its operations for the
year then ended, and the changes in its net assets and its financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 15, 1997
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Executive Vice President
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. Executive Vice President, Treasurer and Secretary
Wesley W. Posvar Richard B. Fisher
Marjorie P. Smuts Vice President
J. Crilley Kelly
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
[LOGO] FEDERATED INVESTORS
Since 1955
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 46031P308
Cusip 46031P407
Cusip 46031P605
G00267-01 (1/97)
[LOGO OF FEDERATED INVESTORS]
Federated
International
Income Fund
6th Annual Report
November 30, 1996
Established 1991
INCOME
President's Message
Dear Shareholder:
Federated International Income Fund was established in 1991, and I am pleased
to present the 6th Annual Report for the fund which covers the period from
December 1, 1995 to November 30, 1996.
This report begins with a discussion with the portfolio manager, Robert Kowit,
Vice President, Federated Global Research Corp. Following his discussion are
three additional items of shareholder interest: a series of graphs showing
long-term investment performance, a complete listing of the fund's diversified
international bond holdings, and the fund's financial statements.
The fund's assets of over $224 million are invested in high-quality debt
issues of 10 countries to pursue generous quarterly income and capital
appreciation.*
The overall international bond market experienced a positive year. Your fund's
performance over the period has exceeded that of the J.P. Morgan Global Traded
Index Excluding U.S.**, the benchmark for the international bond market. A
review of performance for each share class as of November 30, 1996 is shown
below.***
NAV Increase Income Total Return
Class A Shares $11.38 to $11.92=4% $0.87 13.27%
Class B Shares $11.36 to $11.89=4% $0.79 12.41%
Class C Shares $11.36 to $11.89=4% $0.78 12.31%
We hope you are pleased with the positive performance of your investment in
Federated International Income Fund. Thank you for joining the growing number
of shareholders who have diversified their fixed income assets internationally
and entrusted this fund with more than $224 million.
Remember, adding to your account and reinvesting your quarterly dividends in
additional shares is a convenient way to ``pay yourself first'' and enjoy the
benefit of compounding.
As always, we welcome your comments and suggestions.
Sincerely,
Glen R. Johnson
President
January 15, 1997
* International investing can involve additional risks, including currency
risk, increased volatility of foreign securities and differences in auditing
and other financial standards.
** The J.P. Morgan Global Traded Index Excluding U.S. is a total return index
that tracks the traded sovereign issues of 13 international markets. Each
market is weighted according to its traded market capitalization in U.S.
dollar terms and all issues included in the index are liquid with a
remaining maturity of greater than 13 months.
***Performance quoted is based on net asset value, represents past performance
and is not indicative of future results. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns for the period,
based on offering price, for Class A Shares, Class B Shares, and Class C
Shares were 8.14%, 6.55%, and 11.27%, respectively.
Investment Review
Robert Kowit
Vice President
Federated Global
Research Corp.
Unlike U. S. bonds, which, after a strong 1995, weakened considerably in 1996,
international bonds have maintained strong performance. Can you comment, and
was there much correlation among country performance?
After posting very strong gains in 1995, the international bond markets
continued to perform well in 1996. Performance of individual markets was quite
varied, which emphasizes the need to be aggressively diversified throughout the
world. From December 1, 1995 to November 30, 1996, the J.P. Morgan Global
Traded Index Excluding U.S. was up 7.13%, while the J. P. Morgan U. S. Traded
Index was up 5.25%.* Within the international bond universe, there was a spread
of almost 30% between the best and worst performing markets.
Looking at specific markets, Italy was up 33.53%, Australia 23.57%, United
Kingdom 19.74%, New Zealand 18.60%, and Ireland 19.98%. At the other end of the
spectrum, Japan was down 6.03%, Germany up 2.03%, and the Netherlands up 2.03%.
In this environment, how did Federated International Income Fund perform for
shareholders over the one-year period ended November 30, 1996?
The fund delivered strong total return. Total returns based on net asset value
were: Class A Shares, 13.27%; Class B Shares, 12.41%; and Class C Shares,
12.31%.** The funds returns significantly outpaced the 7.13% return of the
overall international bond market, as measured by the J.P. Morgan Global Traded
Index Excluding U.S.
* The J.P. Morgan U.S. Traded Index is a total return index that tracks the
traded sovereign issues of the U.S. Treasuries market. Each issue is weighted
according to its traded market capitalization in U.S. dollar terms and all
issues included in the index are liquid fixed coupon bonds with a remaining
maturity of greater than 13 months.
**Performance quoted is based on net asset value, represents past performance
and is not indicative of future results. Investment return and principal value
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Total returns for the period, based on
offering price, for Class A Shares, Class B Shares, and Class C Shares were
8.14%, 6.55%, and 11.27%, respectively.
What countries were emphasized in the portfolio's high-quality bond holdings as
of November 30, 1996?
Over half of the fund's holdings were concentrated among Germany, the United
Kingdom, Canada, and Denmark. The balance was spread across other countries as
indicated below:
As a Percentage of Net Assets
Germany 19.3%
United Kingdom 16.8%
Canada 11.8%
Denmark 8.6%
Italy 7.0%
New Zealand 6.2%
Spain 6.0%
Australia 5.6%
Norway 4.4%
Sweden 3.6%
What is your current outlook for international bonds, and what is your strategy
for the fund as we enter 1997?
Our outlook for 1997 continues to be favorable for international bonds. Most of
the countries still have very high unemployment and low inflation. Short-term
interest rates are at, or close to, their all-time lows, but real yields on
bonds remain quite attractive. Concern over the upcoming European Monetary
Union deliberations, in advance of the move to a single European currency in
1999, have kept many local investors in shorter dated maturities. Yield curves
are, therefore, much steeper in Europe than they are in the U. S. As investors
move further out the local yield curves, we expect 25-50 basis points of
additional performance from most of the European markets. Japan seems on the
road to economic recovery, and we expect interest rates to start moving higher
in 1997, at which time we plan to start rebuilding positions.
It is important to remember also that international bonds are a truly
diversifying asset class for any fixed-income investor. Over the last ten years
international bonds have consistently outperformed U. S. bonds and we use a
prudent approach to bring the performance potential of international bonds to
our investors. When we actively analyze each market in which we invest, it is
with an eye towards which markets to overweight and which to underweight. We
are not trying to pick the one or two markets that will perform best and place
big bets on them.
Two Ways You May Seek to Invest for Success in
Federated International Income Fund
If you had made an initial investment of $6,000 in the Class A Shares of
Federated Inter-national Income Fund on 6/4/91, reinvested dividends and
capital gains, and didn't redeem any shares, your account would have been worth
$10,500 on 11/30/96. You would have earned a 10.70%* average annual total
return for the five-year investment life span.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends,
and you gain the benefit of compounding.
As of 12/31/96, the Class A Shares' average annual one-year, five-year and
since inception (6/4/91) total returns were 5.87%, 8.22% and 10.55%,
respectively. Class B Shares' average annual one-year and since inception
(9/28/94) total returns were 4.17% and 11.49%, respectively. Class C Shares'
average annual one-year and since inception (4/1/93) total returns were 8.93%
and 11.88%, respectively.
GRAPHIC PRESENTATION `A1'' OMITTED - SEE APPENDIX.
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 4.50%
sales charge applicable to an initial investment in Class A Shares.
Data quoted represents past performance and does not guarantee future results.
Investment return and principal value will fluctuate so an investor's shares,
when redeemed, may be worth more or less than their original cost.
Federated International Income Fund
One Step at a Time:
$1,000 invested each year for five years (reinvesting all dividends and capital
gains) grew to $8,333.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Federated
International Income Fund on 6/4/91, reinvested your dividends and capital
gains and didn't redeem any shares, you would have invested only $6,000, but
your account would have reached a total value of $8,333* by 11/30/96. You would
have earned an average annual total return of 10.97%.
A practical investment plan helps you pursue a high level of income by
investing in high-quality debt securities primarily in foreign currencies.
Through systematic investing, you buy shares on a regular basis and reinvest
all earnings. An investment plan works for you when you invest only $1,000
annually. You can take it one step at a time. Put time, money and compounding
to work!
GRAPHIC PRESENTATION `A2'' OMITTED - SEE APPENDIX.
* No method of investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue
purchases through periods of low price levels.
Federated International Income Fund
Hypothetical Investor Profile:
Investing for a High Level of Income from Abroad
The Griffins-Bob, Nancy and Cal-are a single-income suburban family. Bob and
Nancy don't regard public schools very highly and are building a nest egg for
Cal's private school education.
They've added $2,000 every January to their initial $10,000 investment in
Federated International Income Fund made on 6/4/91, and as of 11/30/96, their
account totaled $31,085, giving them an annual total return of 10.68%.*
Now they don't feel they need to worry about the quality of Cal's education,
and Bob figures his son will get to college even if he never does learn to
catch a football.
The couple is fictional, but the figures are real.
GRAPHIC PRESENTATION `A3'' OMITTED - SEE APPENDIX.
* This hypothetical scenario is provided for illustrative purposes only and
does not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
Federated International Income Fund (Class A Shares)
Growth of $10,000 Invested in
Federated International Income Fund
(Class A Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Income Fund (Class A Shares) (the ``Fund'') from June 4,
1991 (start of performance) to November 30, 1996 compared to the J.P. Morgan
Global Traded Index Excluding U.S. (JPMGXUS).+
GRAPHIC PRESENTATION `A4'' OMITTED - SEE APPENDIX.
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales
charge = $9,550). The Fund's performance assumes the reinvestment of all
dividends and distributions. The JPMGXUS has been adjusted to reflect
reinvestment of income earned on securities in the index.
**Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+The JPMGXUS is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected in
the Fund's performance. This index is unmanaged.
Federated International Income Fund (Class B Shares)
Growth of $10,000 Invested in
Federated International Income Fund
(Class B Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Income Fund (Class B Shares) (the ``Fund'') from
September 28, 1994 (start of performance) to November 30, 1996 compared to the
J.P. Morgan Global Traded Index Excluding U.S. (JPMGXUS).+
GRAPHIC PRESENTATION `A5'' OMITTED - SEE APPENDIX.
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 4.00% contingent deferred sales charge on any
redemption less than three years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The JPMGXUS has been
adjusted to reflect reinvestment of income earned on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPMGXUS is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. This index is unmanaged.
Federated International Income Fund (Class C Shares)
Growth of $10,000 Invested in
Federated International Income Fund
(Class C Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Income Fund (Class C Shares) (the ``Fund'') from April
1, 1993 (start of performance) to November 30, 1996 compared to the J.P. Morgan
Global Traded Index Excluding U.S. (JPMGXUS).+
GRAPHIC PRESENTATION `A6'' OMITTED - SEE APPENDIX.
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less than
one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The JPMGXUS has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPMGXUS is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. This index is unmanaged.
Federated International Income Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
November 30, 1996
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY CREDIT IN U.S.
PAR AMOUNT RATING* DOLLARS
<C> <S> <C> <C>
BONDS--93.9%
- -----------------------------------------------------------------------------------
AUSTRALIAN DOLLAR--5.6%
- -----------------------------------------------------------------------------------
AGENCY--5.6%
-----------------------------------------------------------------
14,000,000 New South Wales Treasury, 11.50%, 7/1/1999 AAA/Aaa $ 12,655,152
----------------------------------------------------------------- --------------
TOTAL AUSTRALIAN DOLLAR 12,655,152
----------------------------------------------------------------- --------------
BRITISH POUND--12.4%
- -----------------------------------------------------------------------------------
SOVEREIGN--9.4%
-----------------------------------------------------------------
4,000,000 Alliance & Leicester BLD, Sub., 8.75%, 12/7/2006 A3 6,909,886
-----------------------------------------------------------------
4,000,000 Bayerische Vereinsbank AG, Munich, Sub., 8.625%,
6/15/2005 NR/Aa1 6,985,541
-----------------------------------------------------------------
4,000,000 Landbk Hessen--Thueringen, Sub. Note, 9.00%,
9/6/2004 AAA/Aaa 7,204,102
----------------------------------------------------------------- --------------
Total 21,099,529
----------------------------------------------------------------- --------------
UTILITIES--3.0%
-----------------------------------------------------------------
4,000,000 British Gas PLC, Sr. Unsub., 8.125%, 3/31/2003 AA-/A1 6,821,621
----------------------------------------------------------------- --------------
TOTAL BRITISH POUND 27,921,150
----------------------------------------------------------------- --------------
CANADIAN DOLLAR--11.8%
- -----------------------------------------------------------------------------------
AGENCY--3.8%
-----------------------------------------------------------------
10,000,000 Ontario Hydro, 9.00%, 6/24/2002 AA-/Aa3 8,661,760
----------------------------------------------------------------- --------------
SOVEREIGN--7.6%
-----------------------------------------------------------------
7,500,000 Canada, Goverment of, 8.50%, 4/1/2002 AAA/Aa1 6,402,862
-----------------------------------------------------------------
6,500,000 Canada, Goverment of, Deb., 8.00%, 6/1/2023 AAA/Aa1 5,603,033
-----------------------------------------------------------------
5,500,000 Quebec, Province of, Deb., 9.375%, 1/16/2023 A+/A2 5,080,037
----------------------------------------------------------------- --------------
Total 17,085,932
----------------------------------------------------------------- --------------
STATE/PROVINCIAL--0.4%
-----------------------------------------------------------------
1,000,000 (a)Metro Toronto, Deb., 7.40%, 9/27/2006 805,465
----------------------------------------------------------------- --------------
TOTAL CANADIAN DOLLAR 26,553,157
----------------------------------------------------------------- --------------
</TABLE>
Federated International Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY CREDIT IN U.S.
PAR AMOUNT RATING* DOLLARS
<C> <S> <C> <C>
BONDS--CONTINUED
- -----------------------------------------------------------------------------------
DANISH KRONE--8.6%
- -----------------------------------------------------------------------------------
SOVEREIGN--8.6%
-----------------------------------------------------------------
26,000,000 Denmark, Bond, 8.00%, 11/15/2001 AA+/Aa1 $ 4,868,410
-----------------------------------------------------------------
25,000,000 Denmark, Bond, 8.00%, 3/15/2006 AAA/Aaa 4,630,258
-----------------------------------------------------------------
57,755,000 Nykredit, Mtg. Bond, 8.00%, 10/1/2026 NR 9,868,712
----------------------------------------------------------------- --------------
TOTAL DANISH KRONE 19,367,380
----------------------------------------------------------------- --------------
DEUTSCHE MARK--19.3%
- -----------------------------------------------------------------------------------
AGENCY--8.6%
-----------------------------------------------------------------
13,000,000 Export-Import Bank Japan, Foreign Gov't. Guarantee, 6.50%,
5/19/2000 AAA/Aaa 8,906,872
-----------------------------------------------------------------
15,000,000 KFW International Finance, Bank Guarantee, 6.75%,
6/20/2005 AAA/Aaa 10,418,958
----------------------------------------------------------------- --------------
Total 19,325,830
----------------------------------------------------------------- --------------
SOVEREIGN--10.7%
-----------------------------------------------------------------
7,500,000 Baden Wurt L-Finance NV, Bank Guarantee, 6.75%,
6/22/2005 AAA/Aaa 5,168,715
-----------------------------------------------------------------
14,000,000 Deutschland Republic, Bond, 6.00%, 6/20/2016 8,687,992
-----------------------------------------------------------------
8,000,000 Germany(Fed Republic), 6.50%, 7/15/2003 AAA/Aaa 5,546,583
-----------------------------------------------------------------
7,000,000 Kredit Wiederauf, Bond, 6.00%, 2/9/2006 AAA/Aaa 4,587,478
----------------------------------------------------------------- --------------
Total 23,990,768
----------------------------------------------------------------- --------------
TOTAL DEUTSCHE MARK 43,316,598
----------------------------------------------------------------- --------------
EUROPEAN CURRENCY UNIT (ECU)--4.6%
- -----------------------------------------------------------------------------------
SOVEREIGN--4.6%
-----------------------------------------------------------------
7,500,000 France O.A.T., Bond, 7.50%, 4/25/2005 AAA/Aaa 10,384,557
----------------------------------------------------------------- --------------
TOTAL EUROPEAN CURRENCY UNIT 10,384,557
----------------------------------------------------------------- --------------
</TABLE>
Federated International Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT VALUE
OR PRINCIPAL CREDIT IN U.S.
AMOUNT RATING* DOLLARS
<C> <S> <C> <C>
BONDS--CONTINUED
- -----------------------------------------------------------------------------------
IRISH POUND--4.4%
- -----------------------------------------------------------------------------------
SOVEREIGN--4.4%
-----------------------------------------------------------------
5,000,000 Republic of Ireland, 9.25%, 7/11/2003 AAA/Aaa $ 9,860,457
----------------------------------------------------------------- --------------
TOTAL IRISH POUND 9,860,457
----------------------------------------------------------------- --------------
ITALIAN LIRA--7.0%
- -----------------------------------------------------------------------------------
SOVEREIGN--7.0%
-----------------------------------------------------------------
8,000,000,000 Buoni Poliennali Del Tes, Bond, 10.50%, 11/1/2000 AAA/Aa3 5,942,676
-----------------------------------------------------------------
7,000,000,000 Buoni Poliennali Del Tes, Bond, 10.50%, 9/1/2005 AAA/Aa3 5,494,442
-----------------------------------------------------------------
5,965,000,000 Buoni Poliennali Del Tes, Deb., 10.50%, 7/15/1998 AAA/A1 4,163,833
----------------------------------------------------------------- --------------
TOTAL ITALIAN LIRA 15,600,951
----------------------------------------------------------------- --------------
NEW ZEALAND DOLLAR--6.2%
- -----------------------------------------------------------------------------------
SOVEREIGN--6.2%
-----------------------------------------------------------------
18,000,000 New Zealand, Government of, Deb., 8.00%, 11/15/2006 NR/Aaa 13,677,312
----------------------------------------------------------------- --------------
TOTAL NEW ZEALAND DOLLAR 13,677,312
----------------------------------------------------------------- --------------
NORWEGIAN KRONE--4.4%
- -----------------------------------------------------------------------------------
SOVEREIGN--4.4%
-----------------------------------------------------------------
25,000,000 Norwegian Government, Bond, 7.00%, 5/31/2001 AAA/Aaa 4,151,216
-----------------------------------------------------------------
36,000,000 Norwegian Government, Foreign Gov't. Guarantee, 5.75%, 11/30/2004 AAA/Aaa 5,509,941
----------------------------------------------------------------- --------------
TOTAL NORWEGIAN KRONE 9,661,157
----------------------------------------------------------------- --------------
SPANISH PESETA--6.0%
- -----------------------------------------------------------------------------------
SOVEREIGN--6.0%
-----------------------------------------------------------------
150,000,000 Spain (Government), Deb., 9.90%, 10/31/1998 AA/Aa2 1,237,495
-----------------------------------------------------------------
1,350,000,000 Spain (Government), Foreign Gov't. Guarantee, 10.30%, 6/15/2002 AA/Aa2 12,222,325
----------------------------------------------------------------- --------------
TOTAL SPANISH PESETA 13,459,820
----------------------------------------------------------------- --------------
</TABLE>
Federated International Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT VALUE
OR PRINCIPAL CREDIT IN U.S.
AMOUNT RATING* DOLLARS
<C> <S> <C> <C>
BONDS--CONTINUED
- -----------------------------------------------------------------------------------
SWEDISH KRONA--3.6%
- -----------------------------------------------------------------------------------
SOVEREIGN--3.6%
-----------------------------------------------------------------
27,000,000 Stadshypotekskas, Foreign Gov't. Guarantee, Series 1551, 7.50%,
3/17/1999 A-/NR $ 4,190,959
-----------------------------------------------------------------
24,000,000 Statens Bostads, Deb., 11.00%, 1/21/1999 NR 3,967,886
----------------------------------------------------------------- --------------
TOTAL SWEDISH KRONA 8,158,845
----------------------------------------------------------------- --------------
TOTAL BONDS (IDENTIFIED COST $196,991,204) 210,616,536
----------------------------------------------------------------- --------------
(B) REPURCHASE AGREEMENT--3.0%
- -----------------------------------------------------------------------------------
$ 6,835,000 BT Securities Corporation, 5.72%, dated 11/29/1996, due 12/2/1996
(at amortized cost) 6,835,000
----------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $203,826,204)(C) $ 217,451,536
----------------------------------------------------------------- --------------
</TABLE>
(a) Denotes a restricted security which is subject to restrictions on resale
and or Federal Securities laws.
At November 30, 1996, the security amounted to $805,465 which represents
0.4% of net assets.
(b) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $203,826,204.
The net unrealized appreciation of investments on a federal tax basis
amounts to $13,625,332 which is comprised of $14,268,052 appreciation and
$642,720 depreciation at November 30, 1996.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($224,374,818) at November 30, 1996.
The following acronym is used throughout this portfolio:
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
Federated International Income Fund
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
November 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $203,826,204) $217,451,536
- ------------------------------------------------------------------------------------------------------
Cash 141,313
- ------------------------------------------------------------------------------------------------------
Income receivable 6,566,902
- ------------------------------------------------------------------------------------------------------
Receivable for shares sold 428,564
- ------------------------------------------------------------------------------------------------------ -----------
Total assets 224,588,315
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for shares redeemed $ 75,686
- -------------------------------------------------------------------------------------------
Payable for taxes withheld 40,372
- -------------------------------------------------------------------------------------------
Accrued expenses 97,439
- ------------------------------------------------------------------------------------------- ---------
Total liabilities 213,497
- ------------------------------------------------------------------------------------------------------ -----------
NET ASSETS for 18,834,177 shares outstanding $224,374,818
- ------------------------------------------------------------------------------------------------------ -----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid in capital $220,365,583
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 13,677,851
- ------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (14,956,181)
- ------------------------------------------------------------------------------------------------------
Undistributed net investment income 5,287,565
- ------------------------------------------------------------------------------------------------------ -----------
Total Net Assets $224,374,818
- ------------------------------------------------------------------------------------------------------ -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($200,757,508 / 16,848,333 shares outstanding) $11.92
- ------------------------------------------------------------------------------------------------------ -----------
Offering Price Per Share (100 / 95.50 of $11.92)* $12.48
- ------------------------------------------------------------------------------------------------------ -----------
Redemption Proceeds Per Share (100.00 / 100 of $11.92) $11.92
- ------------------------------------------------------------------------------------------------------ -----------
CLASS B SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($8,640,964 / 726,640 shares outstanding) $11.89
- ------------------------------------------------------------------------------------------------------ -----------
Offering Price Per Share $11.89
- ------------------------------------------------------------------------------------------------------ -----------
Redemption Proceeds Per Share (94.50 / 100 of $11.89)** $11.24
- ------------------------------------------------------------------------------------------------------ -----------
CLASS C SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($14,976,346 / 1,259,204 shares outstanding) $11.89
- ------------------------------------------------------------------------------------------------------ -----------
Offering Price Per Share $11.89
- ------------------------------------------------------------------------------------------------------ -----------
Redemption Proceeds Per Share (99.00 / 100 of $11.89)** $11.77
- ------------------------------------------------------------------------------------------------------ -----------
</TABLE>
* See "How to Purchase Shares" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Federated International Income Fund
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended November 30, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $191,910) $15,520,503
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $1,476,050
- -----------------------------------------------------------------------------------------
Administrative personnel and services fee 184,998
- -----------------------------------------------------------------------------------------
Custodian fees 168,659
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 102,381
- -----------------------------------------------------------------------------------------
Directors'/Trustees' fees 7,426
- -----------------------------------------------------------------------------------------
Auditing fees 48,606
- -----------------------------------------------------------------------------------------
Legal fees 37,627
- -----------------------------------------------------------------------------------------
Portfolio accounting fees 85,235
- -----------------------------------------------------------------------------------------
Distribution services fee--Class A Shares 448,844
- -----------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 32,098
- -----------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 97,111
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 448,844
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 10,699
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 32,370
- -----------------------------------------------------------------------------------------
Share registration costs 42,709
- -----------------------------------------------------------------------------------------
Printing and postage 49,239
- -----------------------------------------------------------------------------------------
Insurance premiums 4,787
- -----------------------------------------------------------------------------------------
Taxes 32,409
- -----------------------------------------------------------------------------------------
Miscellaneous 4,932
- ----------------------------------------------------------------------------------------- ---------
Total expenses 3,315,024
- -----------------------------------------------------------------------------------------
Waivers--
- ------------------------------------------------------------------------------
Waiver of investment advisory fee $ (71,524)
- ------------------------------------------------------------------------------
Waiver of distribution services fee--Class A Shares (308,676)
- ------------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (229,937)
- ------------------------------------------------------------------------------
Waiver of shareholder services fee--Class C Shares (1,130)
- ------------------------------------------------------------------------------ ---------
Total waivers (611,267)
- ----------------------------------------------------------------------------------------- ---------
Net expenses 2,703,757
- ---------------------------------------------------------------------------------------------------- ----------
Net investment income 12,816,746
- ---------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 11,654,540
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and liabilities in
foreign currency 587,187
- ---------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments and foreign currency 12,241,727
- ---------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $25,058,473
- ---------------------------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated International Income Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
<S> <C> <C>
1996 1995
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------
Net investment income $ 12,816,746 $ 13,126,044
- -----------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency transactions
($6,022,473 net gain and $4,766,152 net loss, respectively, as computed for federal
tax purposes) 11,654,540 (5,611,275)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 587,187 21,171,868
- ----------------------------------------------------------------------------------- ------------- --------------
Change in net assets resulting from operations 25,058,473 28,686,637
- ----------------------------------------------------------------------------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------------
Distributions from net investment income
- -----------------------------------------------------------------------------------
Class A Shares (13,679,429) (13,434,295)
- -----------------------------------------------------------------------------------
Class B Shares (229,103) (28,671)
- -----------------------------------------------------------------------------------
Class C Shares (878,043) (524,373)
- ----------------------------------------------------------------------------------- ------------- --------------
Change in net assets resulting from distributions to shareholders (14,786,575) (13,987,339)
- ----------------------------------------------------------------------------------- ------------- --------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------------------------
Proceeds from sale of shares 88,154,905 64,344,928
- -----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions
declared 5,742,262 4,176,847
- -----------------------------------------------------------------------------------
Cost of shares redeemed (66,837,071) (113,383,781)
- ----------------------------------------------------------------------------------- ------------- --------------
Change in net assets resulting from share transactions 27,060,096 (44,862,006)
- ----------------------------------------------------------------------------------- ------------- --------------
Change in net assets 37,331,994 (30,162,708)
- -----------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------
Beginning of period 187,042,824 217,205,532
- ----------------------------------------------------------------------------------- ------------- --------------
End of period (including undistributed net investment income of $5,287,565 and
$4,448,761, respectively) $ 224,374,818 $ 187,042,824
- ----------------------------------------------------------------------------------- ------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated International Income Fund
Financial Highlights--Class A Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.38 $ 10.52 $ 11.86 $ 10.47 $ 10.84 $ 10.00
- --------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------
Net investment income 0.74** 0.79 0.70 0.88 0.62 0.25
- --------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 0.67 0.84 (0.76) 1.40 (0.20) 0.75
- -------------------------------------------- --------- --------- --------- --------- --------- -----------
Total from investment operations 1.41 1.63 (0.06) 2.28 0.42 1.00
- -------------------------------------------- --------- --------- --------- --------- --------- -----------
LESS DISTRIBUTIONS
- --------------------------------------------
Distributions from net investment income (0.87) (0.77) (0.63) (0.75) (0.71) (0.16)
- --------------------------------------------
Distributions in excess of net investment
income (b) -- -- -- -- (0.05) --
- --------------------------------------------
Distributions from net realized gain on
investments and foreign currency
transactions -- -- (0.65) (0.14) (0.03) --
- -------------------------------------------- --------- --------- --------- --------- --------- -----------
Total distributions (0.87) (0.77) (1.28) (0.89) (0.79) (0.16)
- -------------------------------------------- --------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.92 $ 11.38 $ 10.52 $ 11.86 $ 10.47 $ 10.84
- -------------------------------------------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN (C) 13.27% 16.12% (0.84%) 22.95% 3.82% 10.07%
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------
Expenses 1.30% 1.30% 1.30% 1.25% 0.99% 0.32%*
- --------------------------------------------
Net investment income 6.58% 6.79% 6.67% 7.71% 5.83% 7.54%*
- --------------------------------------------
Expense waiver/reimbursement (d) 0.34% 0.40% 0.20% 0.27% 0.62% 1.18%*
- --------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------
Net assets, end of period
(000 omitted) $200,758 $173,905 $209,008 $220,602 $ 86,937 $ 23,465
- --------------------------------------------
Portfolio turnover 92% 41% 136% 189% 314% 35%
- --------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Per share information presented is based upon the monthly average number of
shares outstanding.
(a) Reflects operations for the period from June 4, 1991 (date of initial
public investment) to November 30, 1991. For the period from start of
business, May 15, 1991, to June 3, 1991, the net investment income was
distributed to the Corporation's Adviser.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated International Income Fund
Financial Highlights--Class B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.36 $ 10.51 $ 10.21
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------
Net investment income 0.84** 0.77 0.08
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency 0.48 0.78 0.22
- ----------------------------------------------------------------------------- --------- --------- -----------
Total from investment operations 1.32 1.55 0.30
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------
Distributions from net investment income (0.79) (0.70) --
- ----------------------------------------------------------------------------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.89 $ 11.36 $ 10.51
- ----------------------------------------------------------------------------- --------- --------- -----------
TOTAL RETURN (B) 12.41% 15.28% 2.44%
- -----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------
Expenses 2.11% 2.10% 2.11%*
- -----------------------------------------------------------------------------
Net investment income 5.76% 5.76% 7.07%*
- -----------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.02% 0.10% 0.10%*
- -----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 8,641 $ 1,123 $101
- -----------------------------------------------------------------------------
Portfolio turnover 92% 41% 136 %
- -----------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Per share information presented is based upon the monthly average number of
shares outstanding.
(a) Reflects operations for the period from September 19, 1994 (start of
business) to November 30, 1994.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated International Income Fund
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 27.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995 1994 1993(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.36 $ 10.48 $ 11.84 $ 10.23
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income 0.67** 0.60 0.58 0.41
- ----------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 0.64 0.95 (0.72) 1.58
- ---------------------------------------------------------------- --------- --------- --------- -----------
Total from investment operations 1.31 1.55 (0.14) 1.99
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Distributions from net investment income (0.78) (0.67) (0.57) (0.38)
- ----------------------------------------------------------------
Distributions from net realized gain on investments and
foreign currency transactions -- -- (0.65) --
- ---------------------------------------------------------------- --------- --------- --------- -----------
Total distributions (0.78) (0.67) (1.22) (0.38)
- ---------------------------------------------------------------- --------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.89 $ 11.36 $ 10.48 $ 11.84
- ---------------------------------------------------------------- --------- --------- --------- -----------
TOTAL RETURN (B) 12.31% 15.32% (1.54%) 19.67%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses 2.09% 2.06% 2.05% 2.05%*
- ----------------------------------------------------------------
Net investment income 5.80% 5.96% 6.00% 5.39%*
- ----------------------------------------------------------------
Expense waiver/reimbursement (c) 0.04% 0.14% 0.10% 0.21%*
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted) $14,976 $12,015 $ 8,098 $ 4,767
- ----------------------------------------------------------------
Portfolio turnover 92% 41% 136% 189 %
- ----------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Per share information presented is based upon the monthly average number of
shares outstanding.
(a) Reflects operations for the period from March 31, 1993 (start of business)
to November 30, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated International Income Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
November 30, 1996
(1) ORGANIZATION
International Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940 (the "Act") as an open-end, management investment
company. The Corporation consists of two portfolios. The financial statements
included herein are only those of Federated International Income Fund (the
"Fund"), a non-diversified portfolio. The financial statements of the other
portfolio are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Class A Shares, Class B Shares
and Class C Shares. The Fund's objective is to seek a high level of current
income in U.S. dollars consistent with prudent investment risk. The Fund has a
secondary investment objective of capital appreciation.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Foreign government securities and listed foreign
corporate bonds are valued according to the last reported sale price on a
recognized securities exchange, if available. If no sale on a recognized
exchange is reported or if the security is traded over-the-counter, a
security is valued according to the last reported bid price. Short-term
securities are valued at the prices provided by an independent pricing
service. However, short-term securities with remaining maturities of sixty
days or less at the time of purchase may be valued at amortized cost, which
approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the
Federated International Income Fund
- --------------------------------------------------------------------------------
Internal Revenue Code, as amended (the "Code"). Distributions to
shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
straddle adjustments on forward contracts, market discount, and foreign
currency transactions. As a result of these differences, the following
required reclassifications have been made to the current year financial
statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED NET
PAID-IN CAPITAL REALIZED GAIN/LOSS Undistributed Net Investment Income
<S> <C> <C>
$ 2,823,434 ($5,632,067) $ 2,808,633
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
Withholding taxes on foreign interest have been provided for in accordance
with the Fund's understanding of the applicable country's tax rules and
rates.
At November 30, 1996, the Fund, for federal tax purposes, had a capital
loss carryforward of $14,956,181, which will reduce the fund's taxable
income arising from future net realized gain on investments, if any, to the
extent permitted by the Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to relieve
the Fund of any liability for federal tax. Pursuant to the Code, such
capital loss carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2002 $10,190,029
2003 $ 4,766,152
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Risks may arise upon entering these transactions
from the potential inability of counter-parts to meet the terms of their
commitments and from unanticipated movements in security prices or foreign
exchange rates. The foreign currency transactions are adjusted by the daily
exchange rate of
Federated International Income Fund
- --------------------------------------------------------------------------------
the underlying currency and any gains or losses are recorded for financial
statement purpose as unrealized until the settlement date. At November 30,
1996, the Fund had no outstanding foreign exchange contracts.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities
at fiscal year end, resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Directors. The Fund will not
incur any registration costs upon such resales. The restricted securities
are valued at the price provided by dealers in the secondary market or, if
no market prices are available, at the fair value as determined by the
pricing committee.
Additional information on each restricted security held at November 30,
1996 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Metro Toronto 9/27/1996 $727,386
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions
Federated International Income Fund
- --------------------------------------------------------------------------------
that affect the amounts of assets, liabilities, expenses and revenues
reported in the financial statements. Actual results could differ from
those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At November 30, 1996, par value shares ($0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
(POUND) OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A 500,000,000
- ----------------------------------------------------------------------------------
Class B 500,000,000
- ----------------------------------------------------------------------------------
Class C 500,000,000
- ---------------------------------------------------------------------------------- -----------------
Total 1,500,000,000
- ---------------------------------------------------------------------------------- -----------------
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 6,869,642 $ 77,132,743 5,228,161 $ 57,263,553
- ----------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 441,539 4,853,225 357,263 3,841,251
- ----------------------------------------------------
Shares redeemed (5,739,277) (64,189,320) (10,170,791) (110,148,750)
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from Class A Share
transactions 1,571,904 $ 17,796,648 (4,585,367) $ (49,043,946)
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 660,138 $ 7,379,995 89,871 $ 989,494
- ----------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 13,806 151,637 1,934 21,170
- ----------------------------------------------------
Shares redeemed (46,135) (511,605) (2,540) (28,402)
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from Class B Share
transactions 627,809 $ 7,020,027 89,265 $ 982,262
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
</TABLE>
Federated International Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 325,894 $ 3,642,167 551,738 $ 6,091,880
- ----------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 67,085 737,400 29,098 314,427
- ----------------------------------------------------
Shares redeemed (191,747) (2,136,146) (295,268) (3,206,629)
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from Class C Share
transactions 201,232 $ 2,243,421 285,568 3,199,678
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from share transactions 2,400,945 $ 27,060,096 (4,210,534) $ (44,862,006)
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Global Research Corp., the Fund's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to .75% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp.("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Class A Shares, Class B Shares and Class C Shares. The Plan
provides that the Fund may incur distribution expenses according to the
following schedule annually, to compensate FSC.
<TABLE>
<CAPTION>
% OF AVG. DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
Federated International Income Fund
- --------------------------------------------------------------------------------
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services("FSS"), the Fund will pay FSS up to 0.25% of
average daily net assets of the Fund for the period. The fee paid to FSS is used
to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1996, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 200,449,817
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 172,813,049
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. The political or economic
developments within a particular country or region may have an adverse effect on
the ability of domiciled issuers to meet their obligations. Additionally,
political or economic developments may have an effect on the liquidity and
volatility of portfolio securities and currency holdings.
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
INTERNATIONAL SERIES, INC.
(Federated International Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated International Income Fund (an investment portfolio of International
Series, Inc., a Maryland corporation), including the schedule of portfolio
investments, as of November 30, 1996, and the related statement of operations
for the year then ended, the statement of changes in net asset for each of the
two years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated International Income Fund, an investment portfolio of International
Series, Inc. as of November 30, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 15, 1997
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Executive Vice President
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. Executive Vice President, Treasurer and Secretary
Wesley W. Posvar Richard B. Fisher
Marjorie P. Smuts Vice President
J. Crilley Kelly
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the fund's prospectus, which contains facts concerning its
objective and policies, management fees, expenses and other information.
[BIRD LOGO] FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
FEDERATED SECURITIES CORP. IS THE DISTRIBUTOR OF THE FUND
AND IS A SUBSIDIARY OF FEDERATED INVESTORS.
Cusip 46031P100
Cusip 46031P209
Cusip 46031P506
3010401 (1/97)
[RECYCLED LOGO]
S
A1. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color coded mountain chart is a visual representation
of the narrative text above it. The `x'' axis reflects computation
periods from 8/17/84 to 11/30/96. The `y'' axis is measured in increments
of $5,000 ranging from $0 to $60,000 and indicates that the ending value of
a hypothetical initial investment of $13,000 in the fund's Class A Shares,
assuming the reinvestment of dividends and capital gains, would have grown
to $55,490 on 11/30/96.
A2. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color coded mountain chart is a visual representation
of the narrative text above it. The `x'' axis reflects computation
periods from 8/17/84 to 11/30/96. The `y'' axis is measured in increments
of $3,000 ranging from $0 to $24,000 and indicates that the ending value of
13 hypothetical yearly investments of $1,000 in the fund's Class A Shares,
assuming the reinvestment of dividends and capital gains, would have grown
to $22,226 on 11/30/96.
A3. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color coded mountain chart is a visual representation
of the narrative text above it. The `x'' axis reflects computation
periods from 8/17/84 to 11/30/96. The `y'' axis is measured in increments
of $10,000 ranging from $0 to $140,000 and indicates that the ending value
of a hypothetical initial investment of $10,000 and subsequent yearly
investments of $5,000 over 12 years in the fund's Class A Shares would have
grown to $133,164 on 11/30/96.
A4. The graphic presentation here displayed consists of a three-column
chart entitled `Top Ten Holdings as of November 30, 1996'' with regard to
`Security Name,'' ``Country'' and `% of Net Assets.'' The information is
as follows: Konami Co., Japan, 1.39%; Dai Nippon Printing Co., Ltd.,
Japan, 1.05%; Hitachi Maxell, Japan, 1.05%; Mitsubishi Heavy Industries,
Ltd., Japan, 1.04%; Fuji Photo Film, Japan, .98%; Japan Tobacco, Inc.,
Japan, .97%; Sony Corp., Japan, .97%; Taisho Pharmaceutical Co., Japan,
.97%; Daito Trust Construction, Japan, .96% and Casio Computer Co., Japan,
.95% for a total percentage of portfolio of 10.33%.
A5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Class A Shares of Federated International Equity Fund are represented by a
solid line. The Morgan Stanley Capital International Europe Australia Far-
East Index (EAFE) is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class A Shares of the fund and the EAFE.
The `x'' axis reflects computation periods from 11/30/86 to 11/30/96. The
`y'' axis reflects the cost of the investment. The right margin reflects
the ending value of the hypothetical investment in the fund's Class A
Shares as compared to the EAFE. The ending values were $18,867 and
$23,964, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Class A Shares Average Annual Total
Returns for the one-year, five-year and 10-year periods ended 11/30/96 and
from the start of performance of Class A Shares (8/17/84) to 11/30/96. The
total returns were 2.66%, 6.48%, 5.95% and 12.58%, respectively.
A6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Class B Shares of Federated International Equity Fund are represented by a
solid line. The EAFE is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class B Shares of the fund and the EAFE.
The `x'' axis reflects computation periods from 9/28/94 to 11/30/96. The
`y'' axis reflects the cost of the investment. The right margin reflects
the ending value of the hypothetical investment in the fund's Class B
Shares as compared to the EAFE. The ending values were $9,850 and $11,825,
respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Class B Shares Average Annual Total
Return for the one-year period ended 11/30/96 and from the start of
performance of Class B Shares (9/28/94) to 11/30/96. The total returns were
1.65% and (0.69)%, respectively.
A7. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Class C Shares of Federated International Equity Fund are represented by a
solid line. The EAFE is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class C Shares of the fund and the EAFE.
The `x'' axis reflects computation periods from 4/1/93 to 11/30/96. The
`y'' axis reflects the cost of the investment. The right margin reflects
the ending value of the hypothetical investment in the fund's Class C
Shares as compared to the EAFE. The ending values were $13,371 and
$16,576, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Class C Shares Average Annual Total
Returns for the one-year period ended 11/30/96 and from the start of
performance of Class C Shares (4/1/93) to 11/30/96. The total returns were
6.66% and 8.24%, respectively.
A1. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color coded mountain chart is a visual representation
of the narrative text above it. The `x'' axis reflects computation
periods from 6/4/91 to 11/30/96. The `y'' axis is measured in increments
of $1,000 ranging from $0 to $11,000 and indicates that the ending value of
a hypothetical initial investment of $6,000 in the fund's Class A Shares,
assuming the reinvestment of dividends and capital gains, would have grown
to $10,500 on 11/30/96.
A2. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color coded mountain chart is a visual representation
of the narrative text above it. The `x'' axis reflects computation
periods from 6/4/91 to 11/30/96. The `y'' axis is measured in increments
of $1,000 ranging from $0 to $9,000 and indicates that the ending value of
six hypothetical yearly investments of $1,000 in the fund's Class A Shares,
assuming the reinvestment of dividends and capital gains, would have grown
to $8,333 on 11/30/96.
A3. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color coded mountain chart is a visual representation
of the narrative text above it. The `x'' axis reflects computation
periods from 6/4/91 to 11/30/96. The `y'' axis is measured in increments
of $4,000 ranging from $0 to $32,000 and indicates that the ending value of
a hypothetical initial investment of $10,000 and subsequent yearly
investments of $2,000 over five years in the fund's Class A Shares would
have grown to $31,085 on 11/30/96.
A4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Class A Shares of Federated International Income Fund are represented by a
solid line. The J.P. Morgan Global Traded Index Excluding U.S. (JPMGXUS)
is represented by a dotted line. The line graph is a visual representation
of a comparison of change in value of a $10,000 hypothetical investment in
the Class A Shares of the fund and the JPMGXUS. The `x'' axis reflects
computation periods from 6/4/91 to 11/30/96. The `y'' axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the fund's Class A Shares as compared to the
JPMGXUS. The ending values were $17,501 and $18,859, respectively. The
legend in the bottom quadrant of the graphic presentation indicates the
fund's Class A Shares Average Annual Total Returns for the one-year and
five-year periods ended 11/30/96 and from the start of performance of Class
A Shares (6/4/91) to 11/30/96. The total returns were 8.14%, 9.72% and
10.74%, respectively.
A5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Class B Shares of Federated International Income Fund are represented by a
solid line. The JPMGXUS is represented by a dotted line. The line graph
is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class B Shares of the fund and the JPMGXUS.
The `x'' axis reflects computation periods from 9/28/94 to 11/30/96. The
`y'' axis reflects the cost of the investment. The right margin reflects
the ending value of the hypothetical investment in the fund's Class B
Shares as compared to the JPMGXUS. The ending values were $12,818 and
$12,873, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Class B Shares Average Annual Total
Return for the one-year period ended 11/30/96 and from the start of
performance of Class B Shares (9/28/94) to 11/30/96. The total returns were
6.55% and 12.09% respectively.
A6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
Class C Shares of Federated International Income Fund are represented by a
solid line. The JPMGXUS is represented by a dotted line. The line graph
is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class C Shares of the fund and the JPMGXUS.
The `x'' axis reflects computation periods from 4/1/93 to 11/30/96. The
`y'' axis reflects the cost of the investment. The right margin reflects
the ending value of the hypothetical investment in the fund's Class C
Shares as compared to the JPMGXUS. The ending values were $14,599 and
$15,260, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Class C Shares Average Annual Total
Returns for the one-year period ended 11/30/96 and from the start of
performance of Class C Shares (4/1/93) to 11/30/96. The total returns were
11.27% and 12.22%, respectively.
