[LOGO OF FEDERATED INVESTORS]
FEDERATED
INTERNATIONAL
EQUITY FUND
14th Annual Report
November 30, 1997
Established 1984
President's Message
Dear Shareholder:
Federated International Equity Fund was established in 1984, and I am pleased to
present its 14th Annual Report, which covers the fiscal year reporting period
from December 1, 1996 to November 30, 1997. This international stock fund is
designed for capital appreciation.* The fund's net assets of $167 million are
invested in 20 countries on 4 continents across 116 securities. The United
Kingdom and France were two of the largest commitments in the fund's diversified
portfolio.
This report begins with an interview with 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.
The European and Latin American regions were strong performers through the first
half of the year. Later in the year, well-publicized difficulties within the
Asian economy--which makes up a large percentage of the international arena--
held down returns overall. In this environment, Federated International Equity
Fund produced returns that outpaced both its benchmark index and the average
international equity fund. A review of fund performance for each share class is
shown below.**
<TABLE>
<CAPTION>
Total Capital Net Asset
Return Gains Value Increase
<S> <C> <C> <C>
Class A Shares 5.89% $0.38 $17.32 to $17.93= 3.4%
Class B Shares 4.97% $0.38 $17.04 to $17.48= 2.5%
Class C Shares 4.96% $0.38 $16.85 to $17.28=2.5%
</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 $167 million.
* International investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards
**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, B, and C Shares were 0.05%, (0.68%), and 3.93%, respectively.
I recommend that shareholders add to their investment accounts on a regular
basis, using the dollar-cost averaging method of investing to take advantage of
price fluctuations.+
As always, we welcome your comments and suggestions.
Sincerely,
/s/ Glen R. Johnson
Glen R. Johnson
President
January 15, 1998
+ 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
Drew Collins
Senior Vice President
Federated Global Research Corp.
Q
What is your review of the international equity markets during the fund's fiscal
year?
A
The international equity markets were marked by two distinct periods during the
most recent fiscal year. The first period was one of relatively strong,
consistent performance in the major European economies, outperformance in Latin
America and the emerging markets of eastern Europe, and continued sluggishness
in Japan. This period lasted through September 1997. The second period, from
September through November 1997, was marked by increased volatility and
uncertainty worldwide as a result of the Asian currency crisis. This crisis
quickly spread to the Latin American markets, as renewed fears of devaluation
affected entire countries, and the emerging markets in eastern Europe. In the
United Kingdom and western Europe, the effect was more industry and stock-
specific. Investors tried to quantify exposure (through exports, joint ventures,
manufacturing, etc.) to Asian markets and how this would effect companies'
earnings prospects. This situation favored defensive investing, and those funds
that avoided exposure to the Asian and Latin American turmoil fared relatively
well.
Q
How did Federated International Equity Fund perform during the reporting 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 5.89%
for Class A Shares, based on net asset value. The total returns for Class B and
C Shares, based on net asset value were 4.97% and 4.96%, respectively.* These
positive returns were higher than the (1.91%) return of the fund's benchmark,
the Morgan Stanley Capital International Europe, Australia, and Far East Index
("EAFE Index")** for the same period.
* 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, B, and C Shares were 0.05%, (0.68%), and 3.93%, respectively.
** The Morgan Stanley Capital International Europe, Australia, and Far East
Index is a market capitalization-weighted foreign securities index widely
used to measure the performance of European, Australian, New Zealand, and Far
Eastern stock markets. The index covers approximately 1,020 companies drawn
from 18 countries in the above regions. The index values its securities daily
in both U.S. dollars and local currency and calculates total returns monthly.
This index is unmanaged and investments cannot be made in an index.
Additionally, the fund's return for the Class A Shares was higher than the 4.88%
total return of the average international equity fund tracked by Lipper
Analytical Services.+
The fund's positive performance was due primarily to two strategic decisions.
First, the fund was heavily invested in European financial stocks (banks,
insurance companies, asset managers, etc.) that benefited significantly from hot
merger activity and consolidation within the financial services industry.
Second, the fund was significantly underweight in Asia--17% of the fund versus
35% for the EAFE Index--which was hurt by anemic growth in Japan and the Asian
financial crisis.
Q
What accounted for the fund's ability to outperform the EAFE Index?
A
On a country level, the fund benefited from an underweighted position relative
to the Index weighting in Japan, as Japan's economy continued its sluggish
growth. However, with significant weakness in the yen/dollar exchange rate,
exporters--companies that receive revenue in dollars and have their costs
denominated in yen--continued to outperform the market. Specifically, Sony and
Nintendo were core holdings in this area, and they continue to be beneficiaries
of a strong U.S. dollar. In addition, the fund benefited from investments in six
Latin American markets that performed quite well during the early part of the
year, as economic growth was strong and forecasted to remain so. (Obviously the
situation has changed since September, and we have sold all positions in Latin
America.)
On an industry level, the fund outperformed the EAFE Index as a result of a
relative overweighting in European financial stocks. Mega-mergers across Europe
fueled stock price appreciation in the industry and led to the realization of
value in commercial banks, investment banks, insurers and asset management
firms. Going forward, this is still a significant part of the fund's exposure
and strategy, and the potential for further consolidation looks increasingly
strong for the coming year.
+ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services as falling into
the category indicated. Lipper returns do not take sales charges into
account.
Q
How were the fund's assets diversified?
A
Approximately 22% of the fund's assets were invested in the United Kingdom, and
11% each in France and Japan. The balance was spread across 16 other countries.
Country and region weightings along with the fund's top ten holdings as of
November 30, 1997 were as follows:
<TABLE>
<CAPTION>
Percentage
Country of Net Assets
<S> <C>
United Kingdom 22.35%
France 11.70%
Japan 11.00%
Germany 9.30%
Switzerland 9.00%
Italy 7.10%
Australia 4.04%
United States 4.00%
Canada 3.57%
Netherlands 3.40%
Sweden 3.20%
Finland 2.81%
Spain 2.71%
Hong Kong 1.80%
Portugal 1.30%
Norway 1.10%
Austria 0.70%
South Africa 0.52%
Hungary 0.50%
Israel 0.40%
<CAPTION>
Percentage
Region of Net Assets
<S> <C>
Europe 74.47%
Asia Pacific 16.84%
Canada 3.57%
Mid-East/Africa 0.92%
Other Countries 4.70%
<CAPTION>
Top Holdings Percentage
Name Country of Net Assets
<S> <C> <C>
Cable & Wireless
Communications United Kingdom 1.02%
Rhone-Poulenc, Class A France 1.97%
Cadbury Schweppes United Kingdom 1.88%
Credit Suisse Group Switzerland 1.63%
Nintendo Corp. Ltd. Japan 1.85%
Credito Italiano Ord Italy 1.60%
Novartis AG Switzerland 1.70%
Bayerische Vereinsbank
AG, Munich Germany 1.52%
Cap Gemini Sogeti France 1.67%
Lloyds TSB Group United Kingdom 1.42%
</TABLE>
Q
What are some of your notable recent purchases for the fund?
A
Recent purchases to the Federated International Equity Fund include:
Cable & Wireless Communications (1.99% of portfolio): An integrated
telecommunications company in the United Kingdom, which provides
telecommunication, television entertainment and information services nationally
in approximately 138 cities and towns. Of particular interest are their Internet
services and mobile telecommunications services.
Benckiser NV (0.77% of portfolio): One of the world's leading manufacturers of
household detergents and cleaning agents, Benckiser is also the leading supplier
of products for the automatic dishwashing process, one of the fastest growing
sectors of the household cleaning products industry.
Incentive AB (0.50% of portfolio): This is a holding company for a group of
international industrial companies within four main business areas: medical
technology, environment, material handling and development. Incentive also has
significant shareholdings in ABB AB and Electrolux, while Gambro is a wholly
owned subsidiary.
Lindt & Spruengli AG (0.55% of portfolio): This firm is a manufacturer and
seller of a wide variety of chocolate, both in Switzerland and abroad. In
September, the company announced a particularly interesting deal with the Swiss
and German postal services to provide greeting cards and praline gift-boxes with
guaranteed 48-hour delivery.
Q
Looking ahead to 1998, what is your outlook for international equities? Are
initiatives underway that may have a positive impact on the economic
difficulties in the Asia Pacific region?
A
The outlook for international equities remains strong for the coming year.
Economic growth is expected to rise from 2.6% this year to 2.8% next year. This
is primarily driven by strong growth in Germany, where gross domestic product is
forecasted to grow 3%.
According to the Organization for Economic Cooperation and Development, the
financial turbulence in Asia may knock roughly 1% off the potential output from
the world's leading economies. However, overall economic growth is still
forecasted at a healthy rate of 2.9%. In addition, Asian currency weakness
should help lower inflation as the rest of the world continues to expand.
Recently, a ground-breaking global pact was reached that will open banking,
insurance and securities markets to foreign competition. In a move to help
restore confidence in Asia's crisis-ridden financial sector, the World Trade
Organization will lock market-opening commitments into binding rules from 102
nations that is has jurisdiction over. Almost immediately, this should
contribute to confidence in the region and, over the longer-term, this pact
should enable Asian nations to attract renewed capital inflows.
Where in the world should you invest?
[LOGO] Federated Asia Pacific Growth Fund
[LOGO] Federated Emerging Markets Fund
[LOGO] Federated European Growth Fund
[LOGO] Federated International Equity Fund
[LOGO] Federated International Growth Fund
[LOGO] Federated International High Income Fund
[LOGO] Federated International Income Fund
[LOGO] Federated International Small Company Fund
[LOGO] Federated Latin American Growth Fund
[LOGO] Federated World Utility Fund
Employ highly qualified, experienced managers in global investing to select
countries and companies outside the U.S. for long-term growth potential.
Call your investment representative to buy shares of 8 international equity
funds and 2 international income funds from Federated Investors.
For more complete information about any of these funds, call 1-800-341-7400 to
ask for a prospectus and read it carefully before you invest.
Foreign investing involves special risks including currency risks, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
Two Ways You May Seek to Invest for Success in
Federated International Equity Fund
Initial Investment:
If you had made an initial investment of $14,000 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 $63,587
on 11/30/97. You would have earned a 12.06%* average annual total return for the
13-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 12/31/97, the Class A Shares' average annual 1-year, 5-year and 10-year
total returns were 1.20%, 8.50%, and 6.35%, respectively. Class B Shares'
average annual 1-year and since inception (9/28/94) total returns were 0.44% and
1.90%, respectively. Class C Shares' average annual 1-year and since inception
(4/1/93) total returns were 5.15% and 7.79%, respectively.**
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIEF1]
* 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 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.
**The total return stated takes into account the 5.50% sales charge for Class A
Shares, the 5.50% contingent deferred sales charge for Class B Shares and the
1.00% contingent deferred sales charge for Class C Shares.
Federated International Equity Fund
One Step at a Time:
$1,000 invested each year for over 13 years (reinvesting all dividends and
capital gains) grew to $24,517.
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 $14,000, but
your account would have reached a total value of $24,517* by 11/30/97. You would
have earned an average annual total return of 7.90%.
A practical investment plan helps you pursue long-term capital growth through a
diversified portfolio primarily invest 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 REPRESENTATION OMITTED. SEE APPENDIX FIEF2]
* This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. 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 August 17, 1984 and--to take
advantage of dollar cost averaging--have invested $5,000 every August since.
By November 30, 1997, they were pleased to see that their $75,000 investment had
grown to $145,650 for an average annual total return of 8.74%.* Gigi's already
picturing a long Mediterranean cruise to celebrate their retirement.
The couple is fictional, but the figures are real.
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIEF3]
* 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
(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, 1987 to November 30, 1997 compared to the Morgan Stanley Capital
International Europe Australia Far-East Index (EAFE).+
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIEF4]
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 SEC 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, 1997 compared to the Morgan
Stanley Capital International Europe Australia Far-East Index (EAFE).+
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIEF5]
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 3.00% contingent deferred sales charge on any
redemption less than 4 years from the purchase date. The maximum contingent
deferred sales charge is 5.50% on any redemption less than 1 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 SEC 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, 1997 compared to the Morgan Stanley
Capital International Europe Australia Far-East Index (EAFE).+
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIEF6]
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 1.00% contingent deferred sales charge on any
redemption less than 1 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 SEC requires to be reflected in the Fund's performance. This index
is unmanaged.
Federated International Equity Fund
Portfolio of Investments
November 30, 1997
<TABLE>
<CAPTION>
Value
Shares U.S. Dollars
- --------- --------------------------------------------------- ------------
<S> <C> <C>
Common Stocks--95.5%
- ----------------------------------------------------------------
Australia--4.0%
---------------------------------------------------
186,000 (a)News Corp., Ltd. $ 993,219
---------------------------------------------------
250,000 Novus Petroleum Ltd. 759,671
---------------------------------------------------
225,000 Santos Limited 929,530
---------------------------------------------------
279,624 St. George Bank Ltd. 1,691,740
---------------------------------------------------
352,000 Suncorp-Metway Ltd. 918,187
---------------------------------------------------
207,000 Woodside Petroleum Ltd. 1,484,034
--------------------------------------------------- ----------
Total 6,776,381
--------------------------------------------------- ----------
Canada--3.6%
---------------------------------------------------
31,000 BCE, Inc. 942,395
---------------------------------------------------
9,900 Bell Canada International, Inc. 144,571
---------------------------------------------------
161,000 (a)Legacy Hotels 1,124,689
---------------------------------------------------
67,000 Mackenzie Financial Corp. 806,719
---------------------------------------------------
12,800 Potash Corporation of Saskatchewan, Inc. 1,006,494
---------------------------------------------------
91,000 TELUS Corp. 1,954,997
--------------------------------------------------- ----------
Total 5,979,865
--------------------------------------------------- ----------
Finland--2.8%
---------------------------------------------------
42,000 Asko Oyj 803,549
---------------------------------------------------
23,200 (a)Huhtamaki Oy, Class I 992,169
---------------------------------------------------
175,000 Merita Ltd, Class A 886,267
---------------------------------------------------
25,200 Nokia AB-A 2,027,779
--------------------------------------------------- ----------
Total 4,709,764
--------------------------------------------------- ----------
France--11.7%
---------------------------------------------------
12,000 AXA 870,835
---------------------------------------------------
12,000 (a)CLF-Dexia France 1,246,083
---------------------------------------------------
11,000 Canal Plus 1,913,676
---------------------------------------------------
32,800 Cap Gemini Sogeti 2,794,776
---------------------------------------------------
13,800 Compagnie Financiere de Paribas, Class A 997,019
---------------------------------------------------
14,600 Elf Aquitaine SA 1,694,137
---------------------------------------------------
12,300 Group Danon 1,962,733
---------------------------------------------------
73,682 Rhone-Poulenc, Class A 3,312,588
---------------------------------------------------
9,082 (a)Rhone-Poulenc, Warrants 33,692
---------------------------------------------------
20,372 Schneider SA 1,090,501
---------------------------------------------------
40,000 Scor SA 1,720,394
---------------------------------------------------
18,633 Total SA-B 1,956,949
--------------------------------------------------- ----------
Total 19,593,383
--------------------------------------------------- ----------
Germany--9.1%
---------------------------------------------------
87,000 Bankgesellschaft Berlin AG 1,852,481
---------------------------------------------------
43,000 Bayerische Vereinsbank AG, Munich 2,554,154
---------------------------------------------------
40,000 Commerzbank AG, Frankfurt 1,390,417
---------------------------------------------------
12,660 (a)Daimler Benz AG 896,645
---------------------------------------------------
21,400 Deutsche Bank, AG 1,372,464
---------------------------------------------------
3,690 Mannesmann SA 1,717,885
---------------------------------------------------
13,000 Siemens AG 763,340
---------------------------------------------------
3,500 (a)Singulus Technologies AG 154,806
---------------------------------------------------
32,000 Tarkett AG Manufacturers 716,757
---------------------------------------------------
7,600 Thyssen AG 1,810,037
---------------------------------------------------
3,980 Viag AG 2,022,612
--------------------------------------------------- ----------
Total 15,251,598
--------------------------------------------------- ----------
Hong Kong--1.8%
---------------------------------------------------
81,809 HSBC Holdings PLC 1,973,711
--------------------------------------------------- ----------
146,000 Hutchison Whampoa 972,666
--------------------------------------------------- ----------
Total 2,946,377
--------------------------------------------------- ----------
Hungary--0.5%
---------------------------------------------------
27,000 OTP Bank RT, GDR 840,375
--------------------------------------------------- ----------
Israel--0.4%
--------------------------------------------------- ----------
46,000 Super-Sol Ltd., ADR 644,000
--------------------------------------------------- ----------
Italy--7.1%
---------------------------------------------------
37,900 (a)Aeroporti di Roma SPA 361,875
---------------------------------------------------
60,700 Bca Pop Bergamo-Cv 971,518
---------------------------------------------------
310,000 Bca Pop Di Milano 1,684,080
---------------------------------------------------
980,000 Credito Italiano 2,683,206
---------------------------------------------------
205,000 Imi 2,141,894
---------------------------------------------------
1,100,000 Montedison SPA 909,259
---------------------------------------------------
270,000 Telecom Italia SPA 1,064,334
---------------------------------------------------
328,000 Telecom Italia SPA 2,044,826
--------------------------------------------------- ----------
Total 11,860,992
--------------------------------------------------- ----------
Japan--11.0%
---------------------------------------------------
82,000 Aiwa Co. Ltd. 1,953,222
---------------------------------------------------
41,000 (a)Bridgestone Corp. 889,873
---------------------------------------------------
50,000 Fuji Photo Film Co. 1,798,237
---------------------------------------------------
30,000 Nintendo Corp. Ltd. 3,102,841
---------------------------------------------------
167 Nippon Telegraph & Telephone Corp. 1,373,947
---------------------------------------------------
34,100 Promise Co. Ltd. 1,883,683
---------------------------------------------------
46,000 Sankyo Co. Ltd. 1,466,954
---------------------------------------------------
7,100 Shokoh Fund & Co. 2,019,432
---------------------------------------------------
22,000 Sony Corp. 1,878,942
---------------------------------------------------
72,000 Takeda Chemical Industries 2,104,290
--------------------------------------------------- ----------
Total 18,471,421
--------------------------------------------------- ----------
Netherlands--3.4%
---------------------------------------------------
5,400 Akzo Nobel NV 949,952
---------------------------------------------------
35,500 (a)Benckiser NV 1,246,868
---------------------------------------------------
38,292 ING Groep, NV 1,556,883
---------------------------------------------------
30,240 Royal Dutch Petroleum Co. 1,574,921
---------------------------------------------------
24,270 (a)Toolex Alpha NV 280,889
--------------------------------------------------- ----------
Total 5,609,513
--------------------------------------------------- ----------
Norway--1.1%
---------------------------------------------------
46,000 Aker Maritime Group ASA 991,462
---------------------------------------------------
46,000 Saga Petroleum A.S., Class A 825,152
--------------------------------------------------- ----------
Total 1,816,614
--------------------------------------------------- ----------
Portugal--1.3%
---------------------------------------------------
46,500 Portugal Telecom SA 2,141,787
--------------------------------------------------- ----------
South Africa--0.5%
---------------------------------------------------
201,200 (a)Dimension Data Holdings Ltd. 869,651
--------------------------------------------------- ----------
Spain--2.7%
---------------------------------------------------
37,300 Repsol SA 1,613,474
---------------------------------------------------
66,000 Telefonica de Espana 1,903,293
---------------------------------------------------
8,800 Zardoya-Otis SA 1,023,942
--------------------------------------------------- ----------
Total 4,540,709
--------------------------------------------------- ----------
Sweden--3.2%
---------------------------------------------------
9,400 Incentive AB, Class A 833,905
---------------------------------------------------
117,000 Skand Enskilda BKN, Class A 1,378,877
---------------------------------------------------
43,000 Skandia Forsakrings AB 2,266,528
---------------------------------------------------
48,000 WM-Data AB 860,973
--------------------------------------------------- ----------
Total 5,340,283
--------------------------------------------------- ----------
Switzerland--9.0%
---------------------------------------------------
18,700 Credit Suisse Group 2,734,570
---------------------------------------------------
47 Lindt & Spruengli AG 922,991
---------------------------------------------------
52,600 Mettler Toledo International, Inc., ADR 940,225
---------------------------------------------------
1,640 Nestle SA 2,413,186
---------------------------------------------------
1,783 Novartis AG 2,848,698
---------------------------------------------------
140 (a)Roche Holding AG 1,252,911
---------------------------------------------------
860 Schw Rueckversicherungs 1,404,783
---------------------------------------------------
900 UBS - Union Bank of Switzerland 1,145,673
---------------------------------------------------
3,200 Zurich Versicherungsgesellschaft 1,346,613
--------------------------------------------------- ----------
Total 15,009,650
--------------------------------------------------- ----------
United Kingdom--22.3%
---------------------------------------------------
49,000 Airtours PLC 978,178
---------------------------------------------------
115,000 Allied Domecq PLC 1,037,154
---------------------------------------------------
147,000 American Port Services 393,505
---------------------------------------------------
222,000 B.A.T. Industries PLC 1,994,660
---------------------------------------------------
237,000 Bank of Scotland, Edinburgh 2,013,356
---------------------------------------------------
38,000 Barclays PLC 916,465
---------------------------------------------------
62,000 British Aerospace 1,692,144
---------------------------------------------------
151,822 British Petroleum Co. PLC 2,076,940
---------------------------------------------------
386,000 (a)Cable & Wireless Communications PLC 1,714,538
---------------------------------------------------
303,000 Cadbury Schweppes PLC 3,147,183
---------------------------------------------------
97,000 EMI Group PLC 730,652
---------------------------------------------------
419,000 (a)Gallaher Group PLC 2,264,478
---------------------------------------------------
311,000 General Electric Co. PLC 2,024,832
---------------------------------------------------
86,000 Glaxo Wellcome PLC 1,888,191
---------------------------------------------------
23,000 Granada Group PLC 329,015
---------------------------------------------------
96,561 (a)Grand Metropolitan PLC 879,012
---------------------------------------------------
209,438 Lloyds TSB Group PLC 2,387,610
---------------------------------------------------
410,000 National Grid Group PLC 2,035,801
---------------------------------------------------
100,000 National Power Co. PLC 955,074
---------------------------------------------------
58,000 Reckitt & Colman PLC 845,363
---------------------------------------------------
175,000 Reed International PLC 1,863,491
---------------------------------------------------
125,000 Regent Inns PLC 690,338
---------------------------------------------------
157,000 Scottish & Newcastle PLC 1,842,844
---------------------------------------------------
124,000 Scottish Power PLC 1,005,234
---------------------------------------------------
320,000 Smith & Nephew PLC 924,166
---------------------------------------------------
484 Smithkline Beecham Corp. 4,496
---------------------------------------------------
1,490 Vodafone Group PLC 9,965
---------------------------------------------------
27,000 Zeneca Group 861,846
--------------------------------------------------- ----------
Total 37,506,531
--------------------------------------------------- ----------
Total Common Stocks (identified cost
$140,611,858) 159,908,894
--------------------------------------------------- -----------
Preferred Stocks--0.9%
- ----------------------------------------------------------------
Austria--0.7%
---------------------------------------------------
28,200 (a)Bank Austria AG, Pfd. 1,152,133
--------------------------------------------------- -----------
Germany--0.2%
---------------------------------------------------
5,748 (a)Pro Sieben Media AG, Preference 275,748
--------------------------------------------------- -----------
Total Preferred Stocks (identified
cost $1,205,908) 1,427,881
--------------------------------------------------- -----------
(b) Repurchase Agreement--4.0%
- ----------------------------------------------------------------
$6,635,000 BT Securities Corp., 5.73%, dated 11/28/1997,
due 12/1/1997 (at amortized cost) 6,635,000
--------------------------------------------------- -----------
Total Investments (identified cost
$148,452,766)(c) $167,971,775
--------------------------------------------------- -----------
</TABLE>
(a) Non-income producing security.
(b) 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.
(c) The cost of investments for federal tax purposes amounts to $148,680,826.
The net unrealized appreciation of investments on a federal tax basis
amounts to $19,290,949 which is comprised of $20,984,350 appreciation and
$1,693,401 depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($167,328,194) at November 30, 1997.
The following acronyms 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, 1997
<TABLE>
<S> <C> <C>
Assets:
- --------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost
$148,452,766 and tax cost 148,680,826) $167,971,775
- --------------------------------------------------------------------------------------
Cash 1,340
- --------------------------------------------------------------------------------------
Cash denominated in foreign currencies (at identified cost $20,328) 20,328
- --------------------------------------------------------------------------------------
Income receivable 441,446
- --------------------------------------------------------------------------------------
Receivable for investments sold 4,005,398
- --------------------------------------------------------------------------------------
Receivable for shares sold 198,808
- -------------------------------------------------------------------------------------- ------------
Total assets 172,639,095
- --------------------------------------------------------------------------------------
Liabilities:
- ------------------------------------------------------------------------
Payable for investments purchased 2,082,406
- ------------------------------------------------------------------------
Payable for shares redeemed 3,018,607
- ------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 5,063
- ------------------------------------------------------------------------
Payable for taxes withheld 21,900
- ------------------------------------------------------------------------
Accrued expenses 182,925
- ------------------------------------------------------------------------
Total liabilities 5,310,901
- -------------------------------------------------------------------------------------- ------------
Net Assets for 9,384,822 shares outstanding $167,328,194
- -------------------------------------------------------------------------------------- ------------
Net Assets Consist of:
- --------------------------------------------------------------------------------------
Paid in capital $136,972,561
- --------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 19,485,253
- --------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency
transactions 12,680,273
- --------------------------------------------------------------------------------------
Distributions in excess of net investment income (1,809,893)
- -------------------------------------------------------------------------------------- ------------
Total Net Assets $167,328,194
- -------------------------------------------------------------------------------------- ------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------------
Class A Shares:
- --------------------------------------------------------------------------------------
Net Asset Value Per Share ($134,857,913 / 7,521,487 shares outstanding) $17.93
- -------------------------------------------------------------------------------------- ------------
Offering Price Per Share (100/94.50 of $17.93)* $18.97
- -------------------------------------------------------------------------------------- ------------
Redemption Proceeds Per Share $17.93
- -------------------------------------------------------------------------------------- ------------
Class B Shares:
- --------------------------------------------------------------------------------------
Net Asset Value Per Share ($23,628,922 / 1,351,711 shares outstanding) $17.48
- -------------------------------------------------------------------------------------- ------------
Offering Price Per Share $17.48
- -------------------------------------------------------------------------------------- ------------
Redemption Proceeds Per Share (94.50/100 of $17.48)** $16.52
- -------------------------------------------------------------------------------------- ------------
Class C Shares:
- --------------------------------------------------------------------------------------
Net Asset Value Per Share ($8,841,359 / 511,624 shares outstanding) $17.28
- -------------------------------------------------------------------------------------- ------------
Offering Price Per Share $17.28
- -------------------------------------------------------------------------------------- ------------
Redemption Proceeds Per Share (99.00/100 of $17.28)** $17.11
- -------------------------------------------------------------------------------------- ------------
</TABLE>
* See "Investing in the Funds" 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, 1997
<TABLE>
<S> <C> <C>
Investment Income:
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $441,681) $ 3,116,430
- ---------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $1) 248,237
- --------------------------------------------------------------------------------------------------------- -----------
Total income 3,364,667
- ---------------------------------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------------------
Investment advisory fee $ 1,732,925
- ------------------------------------------------------------------------------------------
Administrative personnel and services fee 185,000
- ------------------------------------------------------------------------------------------
Custodian fees 218,783
- ------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 305,201
- ------------------------------------------------------------------------------------------
Directors'/Trustees' fees 7,360
- ------------------------------------------------------------------------------------------
Auditing fees 28,294
- ------------------------------------------------------------------------------------------
Legal fees 6,361
- ------------------------------------------------------------------------------------------
Portfolio accounting fees 92,005
- ------------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 154,605
- ------------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 57,956
- ------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 362,378
- ------------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 51,535
- ------------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 19,319
- ------------------------------------------------------------------------------------------
Share registration costs 35,496
- ------------------------------------------------------------------------------------------
Printing and postage 76,147
- ------------------------------------------------------------------------------------------
Insurance premiums 4,202
- ------------------------------------------------------------------------------------------
Taxes 4,226
- ------------------------------------------------------------------------------------------
Miscellaneous 5,252
- ------------------------------------------------------------------------------------------ -----------
Total expenses 3,347,045
- ------------------------------------------------------------------------------------------
Waivers --
- ------------------------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (149,924)
- ------------------------------------------------------------------------------------------ ------------
Net expenses 3,197,121
- --------------------------------------------------------------------------------------------------------- -----------
Net investment income 167,546
- --------------------------------------------------------------------------------------------------------- -----------
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 $5,811) 10,781,853
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 1,272,361
- --------------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments and foreign currency 12,054,214
- --------------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $12,221,760
- --------------------------------------------------------------------------------------------------------- -----------
</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,
1997 1996
<S> <C> <C>
Increase (Decrease) in Net Assets:
- ----------------------------------------------------------------------------------------
Operations--
- ----------------------------------------------------------------------------------------
ONet investment income $ 167,546 $117,810
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions ($12,740,309 and $5,135,689 gain,
respectively, as computed for federal tax purposes) 10,781,853 4,131,728
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments
and translation of assets and liabilities in foreign currency 1,272,361 11,785,397
- ---------------------------------------------------------------------------------------- ------------ ----------
Change in net assets resulting from operations 12,221,760 16,034,935
- ---------------------------------------------------------------------------------------- ------------ ----------
Distributions to Shareholders--
- ----------------------------------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------------------------------
Class A Shares -- (919,568)
- ----------------------------------------------------------------------------------------
Class B Shares -- (194)
- ----------------------------------------------------------------------------------------
Class C Shares -- (155)
- ----------------------------------------------------------------------------------------
Distributions from net realized gains on investments and
foreign currency transactions
- ----------------------------------------------------------------------------------------
Class A Shares (3,655,308) (19,980,524)
- ----------------------------------------------------------------------------------------
Class B Shares (386,187) (726,598)
- ----------------------------------------------------------------------------------------
Class C Shares (169,128) (780,198)
- ---------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to shareholders (4,210,623) (22,407,237)
- ---------------------------------------------------------------------------------------- ------------ ------------
Share Transactions--
- ----------------------------------------------------------------------------------------
Proceeds from sale of shares 226,245,226 146,615,463
- ----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 2,860,246 12,142,035
- ----------------------------------------------------------------------------------------
Cost of shares redeemed (267,012,751) (160,588,761)
- ---------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions (37,907,279) (1,831,263)
- ---------------------------------------------------------------------------------------- ------------ ------------
Change in net assets (29,896,142) (8,203,565)
- ----------------------------------------------------------------------------------------
Net Assets:
- ----------------------------------------------------------------------------------------
Beginning of period 197,224,336 205,427,901
- ---------------------------------------------------------------------------------------- ------------ ------------
End of period $ 167,328,194 $ 197,224,336
- ---------------------------------------------------------------------------------------- ------------ ------------
</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,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.32 $ 17.89 $ 18.53 $ 16.49 $14.09
- ---------------------------------------------------
Income from investment operations
- ---------------------------------------------------
Net investment income 0.04* 0.03 0.09 0.15 0.06
- ---------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency 0.95 1.38 0.17 1.96 2.53
- --------------------------------------------------- ------ ------ ------ ------ ------
Total from investment operations 0.99 1.41 0.26 2.11 2.59
- --------------------------------------------------- ------ ------ ------ ------ ------
Less distributions
- ---------------------------------------------------
Distributions from net investment income -- (0.09) (0.003) (0.07) (0.06)
- ---------------------------------------------------
Distributions excess of net investment income(a) -- -- -- -- (0.13)
- --------------------------------------------------- ------ ------ ------ ------ ------
Total distributions from net investment income -- (0.09) (0.003) (0.07) (0.19)
- --------------------------------------------------- ------ ------ ------ ------ ------
Distributions from net realized gain on
investments and foreign currency transactions (0.38) (1.89) (0.90) -- --
- --------------------------------------------------- ------ ------ ------ ------ ------
Total distributions (0.38) (1.98) (0.90) (0.07) (0.19)
- --------------------------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $ 17.93 $ 17.32 $ 17.89 $ 18.53 $ 16.49
- --------------------------------------------------- ------ ------ ------ ------ ------
Total return(b) 5.89% 8.63% 1.60% 12.82% 18.52
- ---------------------------------------------------
Ratios to average net assets
- ---------------------------------------------------
Expenses 1.71% 1.68% 1.57% 1.61% 1.60%
- ---------------------------------------------------
Net investment income 0.23% 0.15% 0.42% -- 0.13%
- ---------------------------------------------------
Expense waiver/reimbursement(c) 0.10% 0.15% 0.18% -- 0.01%
- ---------------------------------------------------
Supplemental data
- ---------------------------------------------------
Net assets, end of period (000 omitted) $134,858 $172,938 $191,911 $ 261,178 $ 192,860
- ---------------------------------------------------
Average commission rate paid(d) $ 0.0032 $ 0.0018 -- -- --
- ---------------------------------------------------
Portfolio turnover 210% 119% 166% 73% 74%
- ---------------------------------------------------
</TABLE>
* Amount based on average outstanding Shares.
(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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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,
1997 1996 1995 1994(a)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.04 $ 17.70 $18.50 $ 19.61
- -------------------------------------------------------------------
Income from investment operations
- -------------------------------------------------------------------
Net investment loss (0.10)** (0.03) (0.08) (0.01)
- -------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 0.92 1.26 0.18 (1.10)
- ------------------------------------------------------------------- ------ ------ ------ ------
Total from investment operations 0.82 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 (0.38) (1.89) (0.90) --
- ------------------------------------------------------------------- ------ ------ ------ ------
Total distributions (0.38) (1.89) (0.90) --
- ------------------------------------------------------------------- ------ ------ ------ ------
Net asset value, end of period $ 17.48 $ 17.04 $17.70 $ 18.50
- ------------------------------------------------------------------- ------ ------ ------ ------
Total return(c) 4.97% 7.59% 0.68% (5.27%)
- -------------------------------------------------------------------
Ratios to average net assets
- -------------------------------------------------------------------
Expenses 2.56% 2.58% 2.52% 2.59%*
- -------------------------------------------------------------------
Net investment income (0.59%) (0.74%) (0.52%) (0.88%)*
- -------------------------------------------------------------------
Supplemental data
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 23,629 $16,707 $6,370 $ 1,214
- -------------------------------------------------------------------
Average commission rate paid(d) $ 0.0032 $0.0018 -- --
- -------------------------------------------------------------------
Portfolio turnover 210% 119% 166% 73%
- -------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Amount based on average outstanding Shares.
(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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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,
1997 1996 1995 1994 1993(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.85 $ 17.50 $18.30 $16.41$ 14.88
- -------------------------------------------------------------------
Income from investment operations
- -------------------------------------------------------------------
Net investment loss (0.11)** (0.10) (0.12) (0.05) (0.04)
- -------------------------------------------------------------------
Net realized and unrealized gain (loss) on
- -------------------------------------------------------------------
investments and foreign currency 0.92 1.34 0.22 1.98 1.57
- ------------------------------------------------------------------- ------ ------ ------ ------ -----
Total from investment operations 0.81 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 (0.38) (1.89) (0.90) 0.00 0.00
- ------------------------------------------------------------------- ------ ------ ------ ------ -----
Total distributions (0.38) (1.89) (0.90) (0.04) 0.00
- ------------------------------------------------------------------- ------ ------ ------ ------ -----
Net asset value, end of period $ 17.28 $ 16.85 $17.50 $18.30 $16.41
- ------------------------------------------------------------------- ------ ------ ------ ------ ----
Total return(d) 4.96% 7.75% 0.69% 11.75%10.28%
- -------------------------------------------------------------------
Ratios to average net assets
- -------------------------------------------------------------------
Expenses 2.56% 2.57% 2.46% 2.55% 2.57%*
- -------------------------------------------------------------------
Net investment income (0.67%) (0.72%) (0.47%) (0.91%)(1.10%)*
- -------------------------------------------------------------------
Expense waiver/reimbursement(e) 0.00% 0.01% 0.04% 0.00% 0.01%*
- -------------------------------------------------------------------
Supplemental data
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 8,841 $ 7,580 $7,146 $8,836 $ 2,852
- -------------------------------------------------------------------
Average commission rate paid(f) $ 0.0032 $0.0018 -- -- --
- -------------------------------------------------------------------
Portfolio turnover 210% 119% 166% 73% 74%
- -------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Amount based on average outstanding Shares.
(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 principals. 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.
(f) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
Federated International Equity Fund
Notes to Financial Statements
November 30, 1997
1. Organization
International Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (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 portfolios 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 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. With respect to valuation of foreign
securities, trading in foreign cities may be completed at times which vary
from the closing of the New York Stock Exchange. Therefore, foreign
securities are valued at the latest closing price on the exchange on which
they are traded prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. Dollars at
the foreign exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined. 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. The following reclassifications have been made
to the financial statements.
Increase (Decrease)
Undistributed Net
Investment
Accumulated Income/Accumulated
Net Realized Distributions in Excess of
Paid-In Capital Gain/Loss Net Investment Income
$10,726 $1,942,318 ($1,953,044)
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.
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 and dividends 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 forward foreign exchange
contracts for the delayed delivery of securities or foreign currency exchange
transactions. The Fund may enter into foreign currency contract transactions
to protect assets against adverse changes in foreign currency exchange rates
or exchange control regulations. Risks may arise upon entering these
contracts from the potential inability of counter-parts to meet the terms of
their contracts and from unanticipated movements in security prices and
foreign exchange rates. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded for financial statement purposes as unrealized until
the contract settlement date.
At November 30, 1997, the Fund had outstanding forward commitments set forth
below:
<TABLE>
<CAPTION>
Unrealized
Contracts to Contracts at Appreciation
Settlement Date Deliver/Receive In Exchange For Value (Depreciation)
<S> <C> <C> <C> <C>
Sales
December 9, 1997 10,486,053
Austrian Schilling $ 843,608 $ 845,002 ($1,394)
December 1, 1997 3,925,787
Finnish Markka $ 734,753 $ 736,359 ($1,606)
Purchases
December 1, 1997 227,792
Swiss Franc $ 160,079 $ 159,765 ($314)
December 1, 1997 833,537
Pound Sterling $1,409,510 $1,407,761 ($1,749)
Net Unrealized Depreciation on Forward Commitments ($5,063)
</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.
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, 1997, par value shares ($0.0001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
Number 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,
1997 1996
Class A Shares Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 11,656,518 $ 203,925,963 7,740,149 $ 131,449,303
Shares issued to shareholders in
payment of distributions declared 138,301 2,327,602 679,782 11,012,713
Shares redeemed (14,255,933) (251,791,018) (9,162,907) (155,388,757)
Net change resulting from
Class A Share transactions (2,461,114) $ (45,537,453) (742,976) $ (12,926,741)
</TABLE>
Year Ended November 30,
<TABLE>
<CAPTION>
1997 1996
Class B Shares Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 788,772 $ 13,786,500 728,125 $ 12,265,060
Shares issued to shareholders in
payment of distributions declared 22,438 371,580 40,410 649,796
Shares redeemed (440,071) (7,739,343) (147,816) (2,473,361)
Net change resulting from
Class B Share transactions 371,139 $ 6,418,737 620,719 $ 10,441,495
<CAPTION>
Year Ended November 30,
1997 1996
Class C Shares Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 482,587 $ 8,532,763 177,534 $ 2,901,100
Shares issued to shareholders in
payment of distributions declared 9,851 161,064 30,197 479,526
Shares redeemed (430,628) (7,482,390) (166,212) (2,726,643)
Net change resulting from
Class C Share transactions 61,810 $ 1,211,437 41,519 $ 653,983
Net change resulting from
share transactions (2,028,165) $ (37,907,279) (80,738) $ (1,831,263)
</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. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended
to result in the sale of the Corporation's Class B and Class C Shares. The
Plan provides that the Fund may incur distribution expenses according to the
following schedule annually, to compensate FSC.
Percentage
of Average Daily
Share Class Name Net Assets of Class
Class B Shares 0.75%
Class C Shares 0.75%
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 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, 1997, were as follows:
Purchases $344,860,688
Sales $402,935,987
6. Concentration of Credit Risk
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment 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, 1997, the diversification of industries was as follows:
<TABLE>
<CAPTION>
Percentage of
Industry Net Assets
<S> <C>
Aerospace & Military
Technology 1.0
Agency 0.0
Automotive 0.5
Banking 20.3
Basic Industry 0.0
Beverage & Tobacco 3.0
Broadcast Radio & T.V. 3.0
Building Materials &
Components 0.0
Business & Public Services 2.8
Business Equipment & Services 0.0
Cable Television 0.0
Chemicals & Plastics 2.5
Clothing & Textiles 0.0
Construction & Housing 0.4
Consumer Durables 0.0
Consumer Non-Durables 0.0
Consumer Products 0.0
Data Processing and
Reproduction 0.5
Ecological Services &
Equipment 0.0
Electric Utilities 0.0
Electrical & Electronics 5.3
Electronics 0.7
Energy Minerals 1.1
Energy Sources 6.7
Finance 0.0
Financial Intermediaries 0.0
Financial Services 3.8
Food & Drug Retailers 0.0
Food & Household Products 7.8
Forest Products & Paper 0.0
Government Agency
Healthcare 6.7
Industrial Components 1.0
Industrial Products &
Equipment 0.0
Insurance 4.5
Leisure & Entertainment 1.8
Machinery & Engineering 2.7
Machinery & Equipment 0.0
Manufacturing 0.5
Metals & Mining 0.0
Metals--Steel 0.0
Miscellaneous Materials
& Commodities 1.1
Multi-Industry 1.1
Natural Gas Distribution 0.0
Oil & Gas 0.0
Printing & Publishing 0.0
Producer Manufacturing 0.0
Real Estate 0.0
Recreation, Other
Consumer Goods 3.3
Retail Trade 0.0
Services 0.0
Sovereign 0.0
Sovereign Government 0.0
State & Provincial 0.0
Surface Transportation 0.0
Technology 0.0
Telecommunications & Cellular 7.9
Tobacco 1.1
Transportation--Shipping 0.2
Utilities 4.0
Report of Independent Public Accountants
</TABLE>
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, 1997, 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, 1997, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. 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, 1997, 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, 1998
John F. Donahue John F. Donahue
Chairman
Thomas G. Bigley Glen R. Johnson
President
John T. Conroy, Jr. J. Christopher Donahue
Executive Vice President
William J. Copeland Edward C. Gonzales
Executive Vice President
James E. Dowd John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Lawrence D. Ellis, M.D. Richard B. Fisher
Vice President
Edward L. Flaherty, Jr. Karen M. Brownlee
Assistant Secretary
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
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 prospectuses, which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
[LOGO OF FEDERATED INVESTORS]
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
- ----------------------------
www.federatedinvestors.com
- ----------------------------
Cusip 46031P308
Cusip 46031P407
Cusip 46031P605
G00267-01 (1/98)
[LOGO] FEDERATED INVESTORS
Federated
International
Income Fund
7th Annual Report
November 30, 1997
Established 1991
President's Message
- --------------------------------------------------------------------------------
Dear Shareholder:
Federated International Income Fund was established in 1991, and I am pleased to
present the Seventh Annual Report for the fund which covers the fiscal year
reporting period from December 1, 1996 to November 30, 1997.
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 $200 million were invested in high-quality debt issues of
14 countries to provide generous quarterly income and capital appreciation.*
During the reporting period, the fund's total return performance was consistent
with that of the overall international bond market, which was impacted by a very
strong U.S. dollar. The fund's strong level of income helped temper a decline in
net asset value. While negative periods are to be expected in international and
domestic investing, the fund has been paying a healthy level of income since its
inception more than six years ago, and its annualized total return has been
positive over the long-term. A review of performance for each share class is
shown below.**
<TABLE>
<CAPTION>
Total Net Asset
Return Income Value Movement
<S> <C> <C> <C>
Class A Shares (3.70%) $0.83 $11.92 to $10.65 = (10%)
Class B Shares (4.43%) $0.75 $11.89 to $10.62 = (10%)
Class C Shares (4.42%) $0.74 $11.89 to $10.63 = (10%)
</TABLE>
Thank you for joining the growing number of shareholders who have chosen to
diversify their fixed-income assets internationally through this fund.
* International investing involves special 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, B, and C Shares were (8.02%), (9.65%),
and (5.41%), respectively.
- --------------------------------------------------------------------------------
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,
/s/ Glen R. Johnson
Glen R. Johnson
President
January 15, 1998
+ Systematic investing 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 OF ROBERT KOWIT]
Robert Kowit
Vice President
Federated Global Research
Corp.
Q What are your comments on the international bond market, which performed well
in local currency terms, but suffered in terms of U.S. dollar returns?
A International bonds in 1997 posted some of their most dramatic differentials
between performance in local currency terms and U.S. dollars, as the January
1, 1997 through November 30, 1997 returns of these countries illustrate.
<TABLE>
<CAPTION>
Local U.S.
Country* Return Dollar Return
<S> <C> <C>
Australia 12.99% (7.30%)
Denmark 9.39% (5.74%)
Germany 6.28% (8.90%)
Italy 14.45% (1.57%)
Japan 7.21% (4.29%)
</TABLE>
Q In this environment, how did Federated International Income Fund perform for
shareholders over the one-year reporting period ended November 30, 1997?
A The fund's returns were consistent with the (3.38%) return of the overall
international bond market, as measured by the J.P. Morgan Non-Dollar Bond
Index.** Total returns based on net asset value were: Class A Shares,
(3.70%); Class B Shares, (4.43%); and Class C Shares, (4.42%).+
Q Although total return was weakened by a decline in net asset value, the fund
continued to pay a healthy income stream. What was the total income paid per
share during the 12-month reporting period?
A The fund's income stream totaled $0.83 per share for Class A Shares, $0.75
per share for Class B Shares, and $0.74 per share for Class C Shares.
* Source: J.P. Morgan.
** The J.P. Morgan Non-Dollar Bond Index is a total return, unmanaged trade-
weighted of over 360 government and high-grade bonds in 12 developed
countries. Investments cannot be made in an index.
+ 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, B, and C Shares were (8.02%), (9.65%),
and (5.41%), respectively.
- --------------------------------------------------------------------------------
Q What countries were emphasized in the portfolio's high-quality bond holdings
as of November 30, 1997?
A Half of the fund's holdings were concentrated among Germany, the United
Kingdom, Japan, and Canada. The balance was spread across other countries as
indicated below:
<TABLE>
<CAPTION>
Percentage
Country of Net Assets
<S> <C>
Germany 23.5%
Japan 11.9%
United Kingdom 10.5%
France 8.3%
Italy 7.6%
Denmark 6.3%
Canada 6.1%
Spain 4.5%
Australia 4.4%
New Zealand 3.6%
Sweden 3.5%
Greece 2.9%
Norway 2.6%
Portugal 2.2%
Other 2.1%
</TABLE>
Q While 1997 did not live up to its promise as a favorable year for
international bond returns, do you foresee an improved environment as we
enter 1998?
A We expect that the Asian currency crisis will cause economic slowdown and
possible recession in the region and could cut global growth. This should
remove even the slightest possibility of inflation and make international
bonds even more attractive. International bond markets still have much
steeper yield curves than U.S. bond markets (which means international bonds
are rewarding investors with higher yields for assuming the risk associated
with longer maturity securities) and look relatively attractive. Most
currencies should start to strengthen against the dollar as the Asian
currency crisis is resolved, and European growth begins to accelerate.
Two Ways You May Seek to Invest for Success in
Federated International Income Fund
- --------------------------------------------------------------------------------
Initial Investment:
If you had made an initial investment of $7,000 in the Class A Shares of
Federated International Income Fund on 6/4/91, reinvested dividends and capital
gains, and didn't redeem any shares, your account would have been worth $11,796
on 11/30/97. You would have earned a 8.38%* average annual total return for the
six-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 12/31/97, the Class A Shares' average annual 1-year, 5-year and since
inception (6/4/91) total returns were (9.25%), 7.42%, and 8.02%, respectively.
Class B Shares' average annual 1-year and since inception (9/28/94) total
returns were (10.90%) and 6.09%, respectively. Class C Shares' average annual
1-year and since inception (4/1/93) total returns were (6.68%) and 7.91%,
respectively.**
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIIF1]
* 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.
** The total return stated takes into account the 4.50% sales charge for Class A
Shares, the 5.50% contingent deferred sales charge for Class B Shares and the
1.00% contingent deferred sales charge for Class C Shares.
Federated International Income Fund
- --------------------------------------------------------------------------------
One Step at a Time:
$1,000 invested each year over five years (reinvesting all dividends and capital
gains) grew to $8,756.
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 $7,000, but your
account would have reached a total value of $8,756* by 11/30/97. You would have
earned an average annual total return of 6.50%.
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 REPRESENTATION OMITTED. SEE APPENDIX FIIF2]
* This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. 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 year to their initial $10,000 investment in Federated
International Income Fund made on June 4, 1991, and as of November 30, 1997,
their account totaled $30,994, giving them an annual total return of 7.55%.*
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 REPRESENTATION OMITTED. SEE APPENDIX FIIF3]
* 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, 1997 compared to the JP Morgan
Global Traded Index Excluding U.S. (JPMGXUS).+
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIIF4]
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 SEC 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, 1997 compared to the JP Morgan
Global Traded Index Excluding U.S. (JPMGXUS).+
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIIF5]
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 3.00% contingent deferred sales charge on any
redemption less than 4 years from the purchase date. The maximum contingent
deferred sales charge is 5.50% on any redemption less than 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 SEC 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, 1997 compared to the JP Morgan
Global Traded Index Excluding U.S. (JPMGXUS).+
[GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX FIIF6]
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 1.00% contingent deferred sales charge 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 SEC requires to be reflected in the Fund's performance. This index
is unmanaged.
Federated International Income Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
November 30, 1997
<TABLE>
<CAPTION>
Foreign Value
Currency Credit in U.S.
Par Amount Rating* Dollars
- -------------- ------------------------------------------------------ ----------- -------------
<S> <C> <C> <C>
Bonds--94.8%
- ------------------------------------------------------------------------
Australian Dollar--4.3%
- ------------------------------------------------------------------------
Agency--2.4%
------------------------------------------------------
7,000,000 Federal National Mortgage Association, Series EMTN,
6.50%, 7/10/2002 AAA $ 4,878,538
------------------------------------------------------ ------------
State/Provincial--1.9%
------------------------------------------------------
5,500,000 New South Wales Treasury, Local Gov't. Guarantee,
6.50%, 5/1/2006 AAA/NR 3,776,333
------------------------------------------------------ ------------
Total Australian Dollar 8,654,871
------------------------------------------------------ ------------
British Pound--10.2%
- ------------------------------------------------------------------------
Financial Intermediaries--5.5%
------------------------------------------------------
4,000,000 Alliance & Leicester BLD, Sub., 8.75%, 12/7/2006 A3 7,296,053
------------------------------------------------------
2,000,000 Landbk Hessen - Thueringen, Sub. Note, 9.00%, 9/6/2004 AAA/Aaa 3,673,360
------------------------------------------------------ ------------
Total 10,969,413
------------------------------------------------------ ------------
Retailers--3.7%
------------------------------------------------------
4,250,000 Kingfisher PLC, 8.125%, 2/14/2007 A-/A3 7,478,401
------------------------------------------------------ ------------
Sovereign--1.0%
------------------------------------------------------
1,000,000 United Kingdom Treasury, Foreign Gov't. Guarantee,
11.75%, 1/22/2007 Aaa 2,043,570
------------------------------------------------------ ------------
Total British Pound 20,491,384
------------------------------------------------------ ------------
Canadian Dollar--5.9%
- ------------------------------------------------------------------------
Agency--2.6%
------------------------------------------------------
5,500,000 Quebec, Province of, Deb., 9.375%, 1/16/2023 A+/A2 5,261,172
------------------------------------------------------ ------------
Sovereign--2.9%
------------------------------------------------------
6,500,000 Canada, Government of, Deb., 8.00%, 6/1/2023 AAA/Aa1 5,791,058
------------------------------------------------------ ------------
State/Provincial--0.4%
------------------------------------------------------
1,000,000 Metro Toronto, Deb., 7.40%, 9/27/2006 AA+ 779,780
------------------------------------------------------ ------------
Total Canadian Dollar 11,832,010
------------------------------------------------------ ------------
Danish Krone--6.0%
- ------------------------------------------------------------------------
Financial Intermediaries--3.9%
------------------------------------------------------
51,164,000 Nykredit, Mtg. Bond, 8.00%, 10/1/2026 AA-/NR 7,938,636
------------------------------------------------------ ------------
Sovereign--2.1%
------------------------------------------------------
25,000,000 Denmark, Bond, 8.00%, 3/15/2006 AAA/Aaa 4,254,067
------------------------------------------------------ ------------
Total Danish Krone 12,192,703
------------------------------------------------------ ------------
European Currency Unit (ecu)--8.0%
- ------------------------------------------------------------------------
Sovereign--8.0%
------------------------------------------------------
5,400,000 France (Govt of), Bond, 7.00%, 4/25/2006 AAA 6,634,193
------------------------------------------------------ ------------
7,500,000 France O.A.T., Bond, 7.50%, 4/25/2005 AAA/Aaa 9,445,828
------------------------------------------------------ ------------
Total European Currency Unit 16,080,021
------------------------------------------------------ ------------
German Mark--22.7%
- ------------------------------------------------------------------------
Agency--10.4%
------------------------------------------------------
13,000,000 Export-Import Bank Japan, Foreign Gov't. Guarantee,
6.50%, 5/19/2000 AAA/Aaa 7,692,373
------------------------------------------------------ ------------
15,000,000 KFW International Finance, Bank Guarantee,
6.75%, 6/20/2005 AAA/Aaa 9,101,219
------------------------------------------------------ ------------
7,000,000 Kredit Wiederauf, Bond, 6.00%, 2/9/2006 AAA/Aaa 4,094,018
Total 20,887,610
------------------------------------------------------ ------------
Financial Intermediaries--3.7%
------------------------------------------------------
7,500,000 Baden Wurt L-Finance NV, Bank Guarantee,
6.75%, 6/22/2005 AAA/Aaa 4,563,368
------------------------------------------------------ ------------
5,000,000 Deutsche Genossen-Hypobk, Sec. Fac. Bond,
Series 758, 5.75%, 1/22/2007 NR 2,866,459
------------------------------------------------------ ------------
Total 7,429,827
------------------------------------------------------ ------------
Sovereign--8.6%
------------------------------------------------------
14,000,000 Deutschland Republic, Bond, 6.00%, 6/20/2016 AAA 8,074,511
------------------------------------------------------ ------------
8,000,000 Germany (Fed Republic), 6.50%, 7/15/2003 AAA/Aaa 4,827,672
------------------------------------------------------ ------------
7,500,000 Tennessee Valley Authority, Bond, 6.375%, 9/18/2006 Aaa 4,459,172
------------------------------------------------------ ------------
Total 17,361,355
------------------------------------------------------ ------------
Total German Mark 45,678,792
------------------------------------------------------ ------------
Greek Drachma--2.9%
- ------------------------------------------------------------------------
Sovereign--2.9%
------------------------------------------------------
1,000,000,000 Hellenic Republic, 9.20%, 10/31/2002 A2 3,159,226
------------------------------------------------------ ------------
750,000,000 Hellenic Republic, Bond, 11.00%, 10/23/2003 A-/NR 2,578,167
------------------------------------------------------ ------------
Total Greek Drachma 5,737,393
------------------------------------------------------ ------------
Italian Lira--7.4%
- ------------------------------------------------------------------------
Sovereign--7.4%
------------------------------------------------------
8,000,000,000 Buoni Poliennali Del Tes, Bond, 10.50%, 11/1/2000 AAA/Aa3 5,264,766
------------------------------------------------------ ------------
5,965,000,000 Buoni Poliennali Del Tes, Deb., 10.50%, 7/15/1998 AAA/A1 3,545,038
------------------------------------------------------ ------------
1,500,000,000 Buoni Poliennali Del Tes, Deb., 8.50%, 1/1/2004 AAA/Aa3 994,350
------------------------------------------------------ ------------
8,750,000,000 Cert Di Credito Del Tes, Note, 1/1/2004 AAA/NR 5,064,440
------------------------------------------------------ ------------
Total Italian Lira 14,868,594
------------------------------------------------------ ------------
Japanese Yen--11.5%
- ------------------------------------------------------------------------
Sovereign--11.5%
------------------------------------------------------
1,970,000,000 Japan, 5.00%, 9/21/1998 Aaa 16,008,517
------------------------------------------------------ ------------
840,000,000 Japan, 5.30%, 12/20/1999 Aaa 7,221,532
------------------------------------------------------ ------------
Total Japanese Yen 23,230,049
------------------------------------------------------ ------------
New Zealand Dollar--3.5%
- ------------------------------------------------------------------------
Banking--2.4%
------------------------------------------------------
7,839,166 Australia & New Zealand Banking Group,
Melbourne, 2/4/1998 4,771,082
------------------------------------------------------ ------------
Sovereign--1.1%
------------------------------------------------------
3,749,000 New Zealand, 9/16/1998 2,184,577
------------------------------------------------------ ------------
Total New Zealand Dollar 6,955,659
------------------------------------------------------ ------------
Norwegian Krone--2.5%
- ------------------------------------------------------------------------
Sovereign--2.5%
------------------------------------------------------
36,000,000 Norwegian Government, Foreign Gov't. Guarantee,
5.75%, 11/30/2004 AAA/Aaa 5,098,089
------------------------------------------------------ ------------
Total Norwegian Krone 5,098,089
------------------------------------------------------ ------------
Portugese Escudo--2.2%
- ------------------------------------------------------------------------
Sovereign--2.2%
------------------------------------------------------
555,000,000 Portuguese Government, Bond, 11.875%, 2/23/2000 AAA/NR 3,516,642
------------------------------------------------------ ------------
130,000,000 Portuguese Government, Deb., 8.875%, 1/23/2004 AAA/NR 839,734
------------------------------------------------------ ------------
Total Portugese Escudo 4,356,376
------------------------------------------------------ ------------
Spanish Peseta--4.3%
- ------------------------------------------------------------------------
Sovereign--4.3%
------------------------------------------------------
1,080,000,000 Spain (Government), Foreign Gov't. Guarantee,
10.30%, 6/15/2002 AA/Aa2 8,682,517
------------------------------------------------------ ------------
Total Spanish Peseta 8,682,517
------------------------------------------------------ ------------
Swedish Krona--3.4%
- ------------------------------------------------------------------------
Financial Intermediaries--1.6%
------------------------------------------------------
24,000,000 Statens Bostads, Deb., 11.00%, 1/21/1999 AA-/NR 3,291,900
------------------------------------------------------ ------------
Sovereign--1.8%
------------------------------------------------------
28,000,000 Sweden (Kingdom of), 6.00%, 2/9/2005 AAA/Aa1 3,586,242
------------------------------------------------------ ------------
Total Swedish Krona 6,878,142
------------------------------------------------------ ------------
Total Bonds (identified cost $200,650,057) 190,736,600
------------------------------------------------------ ------------
<CAPTION>
Value
Principal Credit in U.S.
Amount Rating* Dollars
- -------------- ------------------------------------------------------ ----------- -------------
<S> <C> <C> <C>
(a) Repurchase Agreement--1.9%
- ------------------------------------------------------------------------
$3,810,000 BT Securities Corp., 5.73%, dated 11/28/1997,
due 12/1/1997 (at amortized cost) $ 3,810,000
------------------------------------------------------ ------------
Total Investments (identified cost $204,460,057(b) $194,546,600
------------------------------------------------------ ------------
</TABLE>
(a) 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.
(b) The cost of investments for federal tax purposes amounts to $204,460,057.
The net unrealized depreciation of investments on a federal tax basis
amounts to $9,913,457 which is comprised of $3,624,681 appreciation and
$13,538,138 depreciation at November 30, 1997.
* 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
($201,220,493) at November 30, 1997.
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, 1997
<TABLE>
<S> <C> <C>
Assets:
- ------------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $204,460,057) $194,546,600
- ------------------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (at identified cost $363,321) 347,308
- ------------------------------------------------------------------------------------------------------------
Income receivable 6,124,287
- ------------------------------------------------------------------------------------------------------------
Receivable for shares sold 432,145
- --------------------------------------------------------------------------------------------- ------------
Total assets 201,450,340
- ------------------------------------------------------------------------------------------------------------
Liabilities:
- -------------------------------------------------------------------------------------------------
Payable for shares redeemed $ 75,000
- -------------------------------------------------------------------------------------------------
Payable to Bank 9,398
- -------------------------------------------------------------------------------------------------
Payable for taxes withheld 34,610
- -------------------------------------------------------------------------------------------------
Accrued expenses 110,839
- ------------------------------------------------------------------------------------------------- --------
Total liabilities 229,847
- ------------------------------------------------------------------------------------------------ ------------
Net Assets for 18,901,339 shares outstanding $201,220,493
- ----------------------------------------------------------------------------------------------- ------------
Net Assets Consist of:
- ------------------------------------------------------------------------------------------------------------
Paid in capital $221,781,271
- ------------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and translation of assets and
liabilities in foreign currency (9,943,658)
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (12,496,276)
- ------------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,879,156
- ------------------------------------------------------------------------------------------------------------ ------------
Total Net Assets $201,220,493
- ------------------------------------------------------------------------------------------------------------ ------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
- ------------------------------------------------------------------------------------------------------------
Class A Shares:
- ------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($180,414,901 / 16,943,417 shares outstanding) $10.65
- ------------------------------------------------------------------------------------------------------------ ------------
Offering Price Per Share (100/95.50 of $10.65)* $11.15
- ------------------------------------------------------------------------------------------------------------ ------------
Redemption Proceeds Per Share $10.65
- ------------------------------------------------------------------------------------------------------------ ------------
Class B Shares:
- ------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($12,520,986 / 1,178,482 shares outstanding) $10.62
- ------------------------------------------------------------------------------------------------------------ ------------
Offering Price Per Share $10.62
- ------------------------------------------------------------------------------------------------------------ ------------
Redemption Proceeds Per Share (94.50/100 of $10.62)** $10.04
- ------------------------------------------------------------------------------------------------------------ ------------
Class C Shares:
- ------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($8,284,606 / 779,440 shares outstanding) $10.63
- ------------------------------------------------------------------------------------------------------------ ------------
Offering Price Per Share $10.63
- ------------------------------------------------------------------------------------------------------------ ------------
Redemption Proceeds Per Share (99.00/100 of $10.63)** $10.52
- ------------------------------------------------------------------------------------------------------------ ------------
</TABLE>
* See "Investing in the Fund" 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, 1997
<TABLE>
<S> <C> <C>
Investment Income:
- ------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $97,752) $15,365,232
- ------------------------------------------------------------------------------------------------------
Expenses:
- ---------------------------------------------------------------------------------------
Investment advisory fee $1,615,465
- ---------------------------------------------------------------------------------------
Administrative personnel and services fee 185,000
- ---------------------------------------------------------------------------------------
Custodian fees 117,371
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 125,697
- ---------------------------------------------------------------------------------------
Directors'/Trustees' fees 7,666
- ---------------------------------------------------------------------------------------
Auditing fees 23,355
- ---------------------------------------------------------------------------------------
Legal fees 5,350
- ---------------------------------------------------------------------------------------
Portfolio accounting fees 112,515
- ---------------------------------------------------------------------------------------
Distribution services fee--Class A Shares 479,089
- ---------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 97,233
- ---------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 80,964
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 479,089
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 32,411
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 26,988
- ---------------------------------------------------------------------------------------
Share registration costs 41,982
- ---------------------------------------------------------------------------------------
Printing and postage 42,308
- ---------------------------------------------------------------------------------------
Insurance premiums 4,350
- ---------------------------------------------------------------------------------------
Taxes 6,897
- ---------------------------------------------------------------------------------------
Miscellaneous 4,707
- --------------------------------------------------------------------------------------- ----------
Total expenses 3,488,437
- ---------------------------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------------
Waiver of distribution services fee--Class A Shares $(311,106)
- --------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (186,763)
- -------------------------------------------------------------------------- ----------
Total waivers (497,869)
- --------------------------------------------------------------------------------------- ----------
Net expenses 2,990,568
- ------------------------------------------------------------------------------------------------------ ------------
Net investment income 12,374,664
- ------------------------------------------------------------------------------------------------------ ------------
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency:
- ------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 2,723,605
- ------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation of
assets and liabilities in foreign currency (23,621,509)
- ------------------------------------------------------------------------------------------------------ ------------
Net realized and unrealized loss on investments and foreign currency (20,897,904)
- ------------------------------------------------------------------------------------------------------ ------------
Change in net assets resulting from operations $ (8,523,240)
- ------------------------------------------------------------------------------------------------------ ------------
</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,
-------------------------------------
1997 1996
------------ -----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
- --------------------------------------------------------------------------------------
Operations--
- --------------------------------------------------------------------------------------
Net investment income $ 12,374,664 $ 12,816,746
- --------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
- --------------------------------------------------------------------------------------
transactions ($2,459,905 net gain and $6,022,473 net gain,
- --------------------------------------------------------------------------------------
respectively, as computed for federal tax purposes) 2,723,605 11,654,540
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of
investments and translation of assets and liabilities
in foreign currency (23,621,509) 587,187
- -------------------------------------------------------------------------------------- ------------ -----------
Change in net assets resulting from operations (8,523,240) 25,058,473
- -------------------------------------------------------------------------------------- ------------ -----------
Distributions to Shareholders--
- --------------------------------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------------------------------
Class A Shares (14,451,238) (13,679,429)
- --------------------------------------------------------------------------------------
Class B Shares (678,030) (229,103)
- --------------------------------------------------------------------------------------
Class C Shares (917,505) (878,043)
- -------------------------------------------------------------------------------------- ------------ -----------
Change in net assets resulting from distributions
to shareholders (16,046,773) (14,786,575)
- -------------------------------------------------------------------------------------- ------------ -----------
Share Transactions--
- --------------------------------------------------------------------------------------
Proceeds from sale of shares 113,690,620 88,154,905
- --------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 6,459,682 5,742,262
- --------------------------------------------------------------------------------------
Cost of shares redeemed (118,734,614) (66,837,071)
- -------------------------------------------------------------------------------------- ------------ -----------
Change in net assets resulting from share transactions 1,415,688 27,060,096
- -------------------------------------------------------------------------------------- ------------ -----------
Change in net assets (23,154,325) 37,331,994
- --------------------------------------------------------------------------------------
Net Assets:
- --------------------------------------------------------------------------------------
Beginning of period 224,374,818 187,042,824
- -------------------------------------------------------------------------------------- ------------ -----------
End of period (including undistributed net investment
income of $1,879,156 and $5,287,565, respectively) $ 201,220,493 $224,374,818
- -------------------------------------------------------------------------------------- ------------ -----------
</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,
----------------------------------------------------------------
1997 1996 1995 1994 1993
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.92 $11.38 $10.52 $11.86 $10.47
Income from investment operations
Net investment income 0.63* 0.74* 0.79 0.70 0.88
Net realized and unrealized gain (loss) on
investments and foreign currency (1.07) 0.67 0.84 (0.76) 1.40
Total from investment operations (0.44) 1.41 1.63 (0.06) 2.28
Less distributions
Distributions from net investment income (0.83) (0.87) (0.77) (0.63) (0.75)
Distributions from net realized gain
on investments and foreign
currency transactions -- -- -- (0.65) (0.14)
Total distributions (0.83) (0.87) (0.77) (1.28) (0.89)
Net asset value, end of period $10.65 $11.92 $11.38 $10.52 $11.86
Total return(a) (3.70%) 13.27% 16.12% (0.84%) 22.95%
Ratios to average net assets
Expenses 1.30% 1.30% 1.30% 1.30% 1.25%
Net investment income 5.83% 6.58% 6.79% 6.67% 7.71%
Expense waiver/reimbursement(b) 0.26% 0.34% 0.40% 0.20% 0.27%
Supplemental data
Net assets, end of period (000 omitted) $180,415 $200,758 $173,905 $209,008 $220,602
Portfolio turnover 67% 92% 41% 136% 189%
</TABLE>
* Per share information presented is based upon the monthly average number of
shares outstanding.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) 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,
---------------------------------------------------
1997 1996 1995 1994(a)
----- ---- ---- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.89 $11.36 $10.51 $10.21
Income from investment operations
Net investment income 0.56** 0.84** 0.77 0.08
Net realized and unrealized gain (loss) on
investments and foreign currency (1.08) 0.48 0.78 0.22
Total from investment operations (0.52) 1.32 1.55 0.30
Less distributions
Distributions from net investment income (0.75) (0.79) (0.70) --
Net asset value, end of period $10.62 $11.89 $11.36 $10.51
Total return(b) (4.43%) 12.41% 15.28% 2.44%
Ratios to average net assets
Expenses 2.06% 2.11% 2.10% 2.11%*
Net investment income 5.06% 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) $12,521 $8,641 $1,123 $101
Portfolio turnover 67% 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)
<TABLE>
<CAPTION>
Year Ended November 30,
-----------------------------------------------------
1997 1996 1995 1994 1993(a)
---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.89 $ 11.36 $ 10.48 $11.84 $ 10.23
Income from investment operations
Net investment income 0.56** 0.67** 0.60 0.58 0.41
Net realized and unrealized gain (loss)
on investments and foreign currency (1.08) 0.64 0.95 (0.72) 1.58
Total from investment operations (0.52) 1.31 1.55 (0.14) 1.99
Less distributions
Distributions from net investment
income (0.74) (0.78) (0.67) (0.57) (0.38)
Distributions from net realized gain
on investments and foreign
currency transactions -- -- -- (0.65) --
Total distributions (0.74) (0.78) (0.67) (1.22) (0.38)
Net asset value, end of period $ 10.63 $ 11.89 $ 11.36 $10.48 $ 11.84
Total return(b) (4.42%) 12.31% 15.32% (1.54%) 19.67%
Ratios to average net assets
Expenses 2.06% 2.09% 2.06% 2.05% 2.05%*
Net investment income 5.10% 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) $ 8,285 $14,976 $12,015 $8,098 $ 4,767
Portfolio turnover 67% 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, 1997
l. Organization
International Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (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 portfolios 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. With respect to valuation of foreign
securities, trading in foreign cities may be completed at times which vary
from the closing of the New York Stock Exchange. Therefore, foreign
securities are valued at the latest closing price on the exchange on which
they are traded prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. Dollars at
the foreign exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined.
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"). 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. The following reclassifications have been made
to the financial statements.
Increase (Decrease)
----------------------------------------
Accumulated Net Undistributed Net
Realized Gain/Loss Investment Income
------------------ -----------------
($263,700) $263,700
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, 1997, the Fund, for federal tax purposes, had a capital loss
carryforward of $12,496,276, 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:
Expiration Year Expiration Amount
--------------- -----------------
2002 $7,730,124
2003 $4,766,152
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. The Fund enters into foreign currency contract
transactions to protect assets against adverse changes in foreign currency
exchange rates or exchange control regulations. 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 the underlying currency and any gains
or losses are recorded for financial statement purpose as unrealized until
the settlement date. At November 30, 1997, the Fund had no outstanding
foreign currency commitments.
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.
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, 1997, par value shares ($0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
Number of Par Value
Class Name Capital Stock Authorized
- -------------- -------------------------
<S> <C>
Class A Shares 500,000,000
Class B Shares 500,000,000
Class C Shares 500,000,000
-------------
Total 1,500,000,000
-------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended November 30,
------------------------------------------------------------
1997 1996
----------------------------- ---------------------------
Class A Shares Shares Amount Shares Amount
- ---------------------------------------------------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 9,374,565 $ 102,068,473 6,869,642 $ 77,132,743
Shares issued to shareholders in
payment of distributions declared 477,630 5,236,339 441,539 4,853,225
Shares redeemed (9,757,111) (105,992,259) (5,739,277) (64,189,320)
Net change resulting from
Class A Share transactions 95,084 $ 1,312,553 1,571,904 $ 17,796,648
<CAPTION>
Year Ended November 30,
------------------------------------------------------------
1997 1996
----------------------------- ---------------------------
Class B Shares Shares Amount Shares Amount
- ---------------------------------------------------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 652,967 $ 7,092,111 660,138 $ 7,379,995
Shares issued to shareholders in
payment of distributions declared 41,746 455,100 13,806 151,637
Shares redeemed (242,871) (2,612,799) (46,135) (511,605)
Net change resulting from
Class B Share transactions 451,842 $ 4,934,412 627,809 $ 7,020,027
<CAPTION>
Year Ended November 30,
------------------------------------------------------------
1997 1996
----------------------------- ---------------------------
Class C Shares Shares Amount Shares Amount
- ---------------------------------------------------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 417,391 $ 4,530,036 325,894 $ 3,642,167
Shares issued to shareholders in
payment of distributions declared 69,887 768,243 67,085 737,400
Shares redeemed (967,042) (10,129,556) (191,747) (2,136,146)
Net change resulting from
Class C Share transactions (479,764) (4,831,277) 201,232 2,243,421
Net change resulting from
share transactions 67,162 $ 1,415,688 2,400,945 $ 27,060,096
</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 0.75% 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.
Percentage of
Average Daily
Share Class Name Net Assets of Class
---------------- -------------------
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
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. Federated Shareholder Services 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, 1997, were as follows:
Purchases $136,105,417
- ----------------------------------------------------- ------------
Sales $135,750,293
- ----------------------------------------------------- ------------
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 Accounts
- -----------------------------------------------------------------------------
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, 1997, 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, 1997, 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, 1997, the results of its operations for the
year then ended, 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, 1998
Directors Officers
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John F. Donahue John F. Donahue
Chairman
Thomas G. Bigley
Glen R. Johnson
John T. Conroy, Jr. President
William J. Copeland J. Christopher Donahue
Executive Vice President
James E. Dowd
Edward C. Gonzales
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Peter E. Madden
Richard B. Fisher
John E. Murray, Jr. Vice President
Wesley W. Posvar Karen M. Brownlee
Assistant Secretary
Marjorie P. Smuts
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 prospectuses, which contain facts
concerning its objective and policies, management fees, expenses, and other
information.
[LOGO] FEDERATED INVESTORS
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 46031P100
Cusip 46031P209
Cusip 46031P506
3010401 (1/98)
INTENATIONAL SERIES, INC. APPENDIX
FIEF1. 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 11/30/97. The "y" axis is measured in increments of $10,000 ranging from $0
to $70,000 and indicates that the ending value of hypothetical initial
investment of $14,000 in the Class A Shares of the Fund, assuming the
reinvestment of capital gains and dividends,would have grown to $63,587 on
11/30/97.
FIEF2. 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 11/30/97. The "y" axis is measured in increments of $5,000 ranging from $0 to
$30,000 and indicates that the ending value of hypothetical yearly investments
of $1,000 in the Class A Shares of the Fund, assuming the reinvestment of
capital gains and dividends,would have grown to $24,517 on 11/30/97.
FIEF3. 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 11/30/97. The "y" axis is measured in increments of $25,000 ranging from $0
to $175,000 and indicates that the ending value of a hypothetical initial
investment of $10,000 and yearly investments of $5,000 in the Class A Shares of
the Fund, assuming the reinvestment of capital gains and dividends,would have
grown to $145,650 on 11/30/97.
FIEF4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. Class A Shares
of Federated International Equity Fund are represented by a solid line. The
Morgan Stanley Capital International Europe Australia Far-East Index is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the the
fund and Morgan Stanley Capital International Europe Australia Far-East Index.
The "x" axis reflects computation periods from 11/30/87 to 11/30/97. The "y"
axis reflects the cost of the investment. The right margin reflects the ending
value of the hypothetical investment in the fund as compared to the Morgan
Stanley Capital International Europe Australia Far-East Index; the ending values
were $20,533 and $18,442, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the fund's Class A Shares' Average Annual Total
Return for the one-year, five-year, ten-year and start of performance (8/17/84)
periods ended 11/30/97, which were 0.05%, 8.11%, 6.85% and 12.06%, respectively.
FIEF5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. Class B Shares
of Federated International Equity Fund are represented by a solid line. The
Morgan Stanley Capital International Europe Australia Far-East Index is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the the
fund and Morgan Stanley Capital International Europe Australia Far-East Index.
The "x" axis reflects computation periods from 9/28/94 to 11/30/97. The "y" axis
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the fund as compared to the Morgan Stanley
Capital International Europe Australia Far-East Index; the ending values were
$10,451 and $11,599, 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 and start of performance (9/28/94) periods ended
11/30/97, which were (0.68%), and 1.40%, respectively.
FIEF6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. Class C Shares
of Federated International Equity Fund are represented by a solid line. The
Morgan Stanley Capital International Europe Australia Far-East Index is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the the
fund and Morgan Stanley Capital International Europe Australia Far-East Index.
The "x" axis reflects computation periods from 4/1/93 to 11/30/97. The "y" axis
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the fund as compared to the Morgan Stanley
Capital International Europe Australia Far-East Index; the ending values were
$14,034 and $16,259, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the fund's Class C Shares' Average Annual Total
Return for the one-year and start of performance (4/1/93) periods ended
11/30/97, which were 3.93% and 7.53%, respectively.
FIIF1. 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 11/30/97. The "y" axis is measured in increments of $2,000 ranging from $0 to
$14,000 and indicates that the ending value of hypothetical initial investment
of $7,000 in the Class A Shares of the Fund, assuming the reinvestment of
capital gains and dividends,would have grown to $11,796 on 11/30/97.
FIIF2. 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 11/30/97. The "y" axis is measured in increments of $1,500 ranging from $0 to
$9,000 and indicates that the ending value of hypothetical yearly investments of
$1,000 in the Class A Shares of the Fund, assuming the reinvestment of capital
gains and dividends,would have grown to $8,756 on 11/30/97.
FIIF3. 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 11/30/97. The "y" axis is measured in increments of $4,000 ranging from $0 to
$36,000 and indicates that the ending value of a hypothetical initial investment
of $10,000 and yearly investments of $2,000 in the Class A Shares of the Fund,
assuming the reinvestment of capital gains and dividends,would have grown to
$30,994 on 11/30/97.
FIIF4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. Class A Shares
of Federated International Income Fund are represented by a solid line. The JP
Morgan Global Traded Index Excluding U.S. is represented by a broken line. The
line graph is a visual representation of a comparison of change in value of a
$10,000 hypothetical investment in the the fund and JP Morgan Global Traded
Index Excluding U.S. The "x" axis reflects computation periods from 6/4/91 to
11/30/97. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the fund as compared
to the JP Morgan Global Traded Index Excluding U.S.; the ending values were
$16,854 and $18,222, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the fund's Class A Shares' Average Annual Total
Return for the one-year, five-year and start of performance (6/4/91) periods
ended 11/30/97, which were (8.02%), 8.09% and 8.38%, respectively.
FIIF5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. Class B Shares
of Federated International Income Fund are represented by a solid line. The JP
Morgan Global Traded Index Excluding U.S. is represented by a broken line. The
line graph is a visual representation of a comparison of change in value of a
$10,000 hypothetical investment in the the fund and JP Morgan Global Traded
Index Excluding U.S. The "x" axis reflects computation periods from 9/28/94 to
11/30/97. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the fund as compared
to the JP Morgan Global Traded Index Excluding U.S.; the ending values were
$12,316 and $12,438, 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 and start of performance (9/28/94) periods ended
11/30/97, which were (9.65%) and (6.78%), respectively.
FIIF6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. Class C Shares
of Federated International Income Fund are represented by a solid line. The JP
Morgan Global Traded Index Excluding U.S. is represented by a broken line. The
line graph is a visual representation of a comparison of change in value of a
$10,000 hypothetical investment in the the fund and JP Morgan Global Traded
Index Excluding U.S. The "x" axis reflects computation periods from 4/1/93 to
11/30/97. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the fund as compared
to the JP Morgan Global Traded Index Excluding U.S.; the ending values were
$14,586 and $14,106, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the fund's Class C Shares' Average Annual Total
Return for the one-year and start of performance (4/1/93) periods ended
11/30/97, which were (5.41%) and 8.42%, respectively.
